Entrepreneurs and their investors: why aren't they getting a bigger bang for their buck?

New Zealand has one of the highest rates of entrepreneurial activity in the OECD, yet there are alarming signs that entrepreneurs do not sustain their activity. Research has indicated that the lure of work-life balance has drawn entrepreneurs away from continuing to build wealth (Frederick, 2004). However, evidence from the Global Entrepreneurship Monitor (GEM) 2004 Report and data from the Ministry of Economic Development (MED) suggest that other important factors have also contributed to the poor record of sustainability. The first causal factor is the self confidence and skill of the entrepreneurs themselves to start up their venture. Without the skill to develop a business and to guide it through ongoing challenges, entrepreneurial activity is prone to falter and fail. A second factor which is crucial in contributing to the successful growth of entrepreneurial activity is investor support and backing. Entrepreneurs need mentoring and encouragement during the start up stage of their fledgling ventures, and without this essential nurturing the likelihood of a successful outcome is significantly reduced. A third factor is the preference of investors to invest in ventures where their skills, knowledge and experiences are relevant to the new venture. A high degree of preference and investor confidence would suggest that investors were willing to use their skills to mentor and support the entrepreneur in whom they have invested. It would also suggest a more positive outcome in comparison with investors who lacked confidence or invested in areas that were outside of their area of expertise. This study examines entrepreneurs' perceptions of their ability and skill to manage a new venture successfully, the relationship between investor preferences of choice and their ventures, and the correlation between investor preferences and their return on investment (ROI), to ascertain whether the desire of investors to support and mentor in their own skills area has an impact on ROI.