Team dynamics influences the process of knowledge exchange. The paper focuses on exploring this relationship in software development organizations. To explore this, we have studied several team dynamics factors that influence the Knowledge Management Processes (KMP) in Very Small Entities (VSEs) [1]. A survey was conducted in a variety of VSEs and through statistical and qualitative content analysis for the research data, results indicate that small teams, informal team process and structure have an important influence on the level of team dynamics in the software development process.