Do venture capitalists imitate portfolio size?

Gygax, André F.; Griffiths, Anna

doi:10.1007/s11408-006-0040-4

Cited by 5 publications

(4 citation statements)

References 62 publications

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“…Moreover, considering the size of the VC fund per number of managers, we test whether the extent of the VC involvement depends on portfolio size, as modeled by Keuschnigg (2003, 2004), and Keuschnigg (2004) (see also Cumming 2006;Gygax 2006). As well, note that since VCs exerting more effort are able to manage larger portfolios, the variable we employ in the analysis (the number of entrepreneurial firms in the portfolio per number of VC managers 12 ) may be endogenous to our advising and conflict measures.…”

Section: Explanatory Variables To Test Hypotheses 1-3mentioning

confidence: 99%

Advice and monitoring in venture finance

Cumming

Johan

2007

Fin Mkts Portfolio Mgmt

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This paper provides empirical insight into the role of contracts and legal systems for managing investor–investee relationships along two dimensions: providing advice and addressing conflict. We examine a new detailed dataset from European venture capital (VC) funds. We match very specific contractual terms in VC contracts with the effort (total time spent) and advice that VCs provide to their entrepreneurial investee firms. We also analyze VC–entrepreneur conflicts. We compare the importance of contractual versus non-contractual governance mechanisms, as well as the role of legal systems in different countries for facilitating VC–entrepreneur relationships. The data indicate VC cash-flow and control rights significantly facilitating effort and advice that VCs provide to entrepreneurs. VC–entrepreneur conflicts are closely tied to the quality of laws in which the entrepreneur resides: higher quality legal systems mitigate VC–entrepreneur conflicts. The data further indicate that non-contractual governance mechanisms significantly facilitate VC advice and mitigate VC–entrepreneur conflicts. The results provide a unique unifying look into the role of actual VC contracts and legal settings versus non-contractual governance mechanisms, risk, and success potential on VC–entrepreneur relationships in an international context. Copyright Swiss Society for Financial Market Research 2007Venture capital, Monitoring, Advice, G24, G28, G31, G32,

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Section: Explanatory Variables To Test Hypotheses 1-3mentioning

confidence: 99%

Advice and monitoring in venture finance

Cumming

Johan

2007

Fin Mkts Portfolio Mgmt

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“…A further theoretical analysis of monitoring and advising is offered by Schindele (2006), for which empirical support is provided by Cumming and Johan (2007). Gygax and Griffiths (2007) extend the range of determinants by considering social and economic factors, for which they provide empirical evidence. Further empirical evidence for Germany is provided by Tykvová (2006), who distinguishes between independent and captive funds.…”

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confidence: 99%

Venture capital investment practices in Europe and the United States

Schwienbacher

2008

Financ Markets Portfolio Manage

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Link to publication Citation for published version (APA): Schwienbacher, A. (2008). Venture capital investment practices in Europe and the United States. Financial Markets and Portfolio Management, 22(3), 195-217. DOI: 10.1007/s11408-008-0080-z General rightsIt is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s) and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an open content license (like Creative Commons). Disclaimer/Complaints regulationsIf you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library: http://uba.uva.nl/en/contact, or a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible. Abstract This article focuses on the investment practices and contract behavior of venture capitalists in relation to their portfolio companies. Using a unique selfcollected data set, we provide new evidence on the venture capital industry in Europe and the United States. Important differences are identified between the two, particularly with respect to the use of convertible securities, replacement of former management, stage financing, deal syndication, and duration of exit stage. The most striking difference involves the use of convertible securities, which are used far less often in Europe than in the United States. These differences suggest that European venture capitalists engage in less monitoring and thus adopt a more hands-off approach to their portfolio companies as compared to US venture capitalists.

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“…Kanniainen and Keuschnigg (2003) confirm that VC fund managers not only finance but also add value to their portfolio companies. They point out that advising portfolio companies is time consuming and creates a trade-off between intensity of advice and portfolio size (Gygax and Griffiths 2007). They also determine an optimal number of portfolio companies with respect to the intensity of managerial advice.…”

Section: Fund Managers' Resource Allocation Potential On the Portfolimentioning

confidence: 99%

Performance differentiation: cutting losses and maximizing profits of private equity and venture capital investments

Lauterbach

Welpe

Fertig

2007

Fin Mkts Portfolio Mgmt

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Recent research has pointed out the need to differentiate between good versus poor performance of venture capital and private equity investments and to analyze the factors that determine the ‘winners’ and ‘losers’ of a fund. This study examines the different contractual and behavioral characteristics and their influence on the positive and negative performances of private equity investments. Specifically, we analyze how fund managers apply tools and investment behavior to mitigate risks and maximize returns. The empirical investigation of these questions is based on a merged dataset, which combines the Venture Economics and CEPRES databases. It includes a total of 1,011 investments made by 137 different funds that belong to 54 private equity and venture capital firms worldwide over the period from 1979 to 2003. Our results confirm that the reduction of losses and the maximization of investment profits have different antecedents. Although losses are minimized by the use of convertibles and by increasing the venture capital firms’ accumulated experience, profits are increased by the potential of the fund’s management to allocate resources to portfolio companies. Our findings contribute to the understanding of the determinants of venture capital and private equity returns by differentiating between the mitigation of risks and the maximization of profits. Copyright Swiss Society for Financial Market Research 2007Private equity, Venture capital, Staging, Risk, Return, Performance, Profit, Losses, G24, E51,

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Do venture capitalists imitate portfolio size?

Cited by 5 publications

References 62 publications

Advice and monitoring in venture finance

Advice and monitoring in venture finance

Venture capital investment practices in Europe and the United States

Performance differentiation: cutting losses and maximizing profits of private equity and venture capital investments

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