Effect Of Venture Capital Support on Organizational Performance of Tech Firms in Nairobi City County, Kenya

Abstract

Given the high capital requirements and rapid pace of technological advancements in the tech industry, venture capital has emerged as an attractive funding option for these firms. The allure of venture capital lies in its ability to provide not only financial resources but also valuable expertise, industry connections, and strategic guidance. Tech firms recognize the benefits of partnering with venture capitalists who understand the intricacies of the tech landscape and can offer valuable insights, mentorship, and networking opportunities. The objective of this research was to assess the effect of venture capital support on organizational performance of tech firms in Nairobi City County, Kenya. The specific objectives were; to determine the effect of venture capital financial support on organizational performance, to establish the effect of venture capital management support on organizational performance, to assess the effect of venture capital technical support on organizational performance and to determine the effect of venture capital mentoring support on organizational performance of tech firms in Nairobi City County, Kenya. The research was based on three theories namely, the resource-based view theory, agency theory and pecking order theory. Descriptive research design was employed in this study. The target population of this study was all the 106 firms’ tech firms in Nairobi City County, Kenya that had received venture capital support between 2016 and 2022. Since the population was relatively small, the study was a census. The target respondent was the head of operations in each firm or their equivalent. Questionnaire was utilized in primary data collection. Quantitative data was collected. The collected data was analysed through descriptive, correlational and multiple linear regression method. Regression results revealed that venture capital financial support, venture capital management support, venture capital technical support, and venture capital mentoring support together account for 93.1% of the variation in the performance of tech firms in Nairobi County, Kenya. The explanatory power of the model was statistically significant as the p value was 0.000. Further the results revealed that venture capital financial support (β = 0.316, p < 0.000); venture capital management support (β = 0.280, p < 0.000); venture capital technical support (β = 0.236, p = 0.004); and venture capital mentoring support (β = 0.731, p < 0.000) had a positive and significant effect on performance of tech firms in Nairobi County, Kenya. The study concludes that venture capital financial, management, technical, and mentoring support positively influence overall performance of tech firms in Nairobi County, Kenya. It is recommended that policymakers should create an enabling environment to attract more venture capital investment into Nairobi's tech sector. Additionally, tech entrepreneurs should actively seek and leverage venture capital support, particularly focusing on building strong relationships with venture capitalists who offer not only financial resources but also valuable management, technical, and mentoring assistance.