System dynamics of performance evaluation of venture capital funds with an improvement approach

Venture capital (VC) funds play an essential role in supporting start-ups and in fostering innovation. However, comprehensive and dynamic models for evaluating the performance remain underdeveloped, particularly in uncertain and unstable environments. This research gap necessitates an improvement-oriented system dynamics model that can address both the strengths and weaknesses of fund operations. This study aims to develop a system-dynamics-based model for evaluating the performance of venture capital funds through an improvement-oriented approach under conditions of uncertainty. The research was conducted in 2024 using a mixed-methods design, combining expert interviews, the fuzzy Delphi technique, and causal loop diagrams in the Vensim software. In interviews with 20 organizational and academic experts, 29 subthemes and 17 key indicators were identified and grouped into five fundamental dimensions, which were later validated through the fuzzy Delphi process. The resulting model integrates linear relationships and causal loop structures, leading to the formulation of two causal loops that represent the dynamic interactions among the factors influencing VC fund performance. These findings indicate that financial planning, assets, income management, and risk management were the most influential factors. The proposed dynamic, improvement-oriented framework offers practical advice for enhancing the adaptability and performance of venture capital funds in uncertain environments. Furthermore, adopting a dynamic approach to evaluate the success of venture capital funds, rather than static or cross-sectional models, can yield substantial value-added insights.