Using accounting information to support venture capital (VC) decisions

Accounting information has traditionally played a crucial role in business valuations (Arnold and Moizer, 1984). However, the role of accounting and a company’s information system in the assessments and valuations of investee firms by VC investors is poorly understood. This is especially true for VC investors in developing nations such as countries in the Middle East. The current chapter examines the importance placed on accounting data and an investee’s information system by Saudi VCs who operate throughout the Middle East. The analysis is based on interviews with a group of Saudi VC investors as well as several entrepreneurs who were seeking VC funding at that time. The results suggest that in the Saudi context, accounting information can play a crucial role in the VC decision to invest in a company; although the type of accounting information used (audited v internally produced) varied according to the maturity of the investee company.