scholarly journals Exit market liquidity and venture capitalists’ investment behaviour: Evidence from Australia, Canada and the United Kingdom

2010 ◽  
Vol 8 (1) ◽  
pp. 743-757
Author(s):  
Shrimal Perera ◽  
Tabita Bertsch ◽  
Jayasinghe Wickremanayake
Keyword(s):  
United Kingdom ◽  
Venture Capital ◽  
Early Stage ◽  
Market Liquidity ◽  
Venture Capitalists ◽  
The United Kingdom ◽  
Capital Funding ◽  
Exogenous Factors ◽  
Start Ups ◽  
Investment Behaviour

This study investigates the effect of exit market liquidity on venture capitalists’ (VCs’) investment behaviour. The sample consists of 4,758 investment rounds disbursed by venture capital funds in three selected common law-based OECD countries (Australia, Canada and the United Kingdom) during 1990-2005. The results indicate that investments in early-stage projects by VCs are not related to exit market liquidity conditions after controlling for exogenous factors. Empirical results, however, show that exit market liquidity is positively associated with VCs’ investments in new projects (as opposed to follow-on projects). Put differently, new firms (including start-ups) are more likely to obtain venture capital funding during times of liquid exit market conditions. Arguably, these findings highlight the importance of ‘timing’ of new project launch

scholarly journals Venture Capital and Valuation of Innovative Start-ups: the Business Case of Mosaicoon

2020 ◽  
Vol 9 (2) ◽  
pp. 01-15
Author(s):  
Antonio Del Pozzo ◽  
◽  
Salvatore Loprevite ◽  
Domenico Nicolò ◽  
◽  
...  
Keyword(s):  
Venture Capital ◽  
Performance Indicators ◽  
Early Stage ◽  
Business Case ◽  
Cash Flows ◽  
Venture Capitalists ◽  
Expected Return ◽  
Continuous Growth ◽  
Start Up ◽  
Start Ups

This article analyzes the decline of one of the best well-known and promising European start-ups: Mosaic on L. t. d. The business case is emblematic of many bankruptcies caused by strategies focusing on the expectations of continuous growth of economic capital and based on unconventional performance indicators, without considering the economic-financial results and self-financing. The expectations of return on capital are extremely high and this forces one to undertake risky growth paths with very high expected return rates. This also happens in the absence of an advanced and effective capital market. Venture capitalists, even when they are public, cannot compensate for these excesses. The analysis of the case contributes to the debate on the complex topic of assessing the potentiality of start-ups and it provides useful suggestions to operators (venture capitalists, business angels, start uppers, investors, etc.) for greater prudence in considering the non-financial performance indicators. Start-ups do not produce economic results in the early stage, so they may also be valued by using non-financial metrics. However, unconventional indicators cannot be the only parameters for evaluating. When the firm is a start-up without meaningful financial information, it is more appropriate to refer to a reliable business plan drawn up on rigorous estimates of expected incomes and cash flows. Keywords: Venture capital, Start-up, Default, Performance indicators, Business case.

The Dark Side of Venture Capital Syndication and IPO Firm Performance

2018 ◽  
pp. 429-459
Author(s):  
Salim Chahine ◽  
Igor Filatotchev ◽  
Robert E. Hoskisson ◽  
Jonathan D. Arthurs
Keyword(s):  
United States ◽  
United Kingdom ◽  
Venture Capital ◽  
Initial Public Offerings ◽  
The United States ◽  
Dark Side ◽  
Agency Conflicts ◽  
The United Kingdom ◽  
Stock Market Performance ◽  
Multiple Agency

This chapter integrates agency research with an institutional perspective and investigates multiple agency conflicts in venture capital (VC) syndicates and their effect on stock-market performance of initial public offerings (IPOs) in the United States and the United Kingdom. Using a matched sample of 402 IPOs, the authors show that the size and diversity of a VC syndicate have a negative impact on performance, but this impact is higher in the United States. Ownership concentration within a syndicate improves performance, but this effect is stronger in the United Kingdom. Results indicate that the extent of multiple agency conflicts and their potential remedies are not universal and depend on formal and informal institutions.

scholarly journals Innovative start-ups and young entrepreneurs: Definition of venture capital and findings from Switzerland

2017 ◽  
Vol 7 (1) ◽  
pp. 75-81
Author(s):  
Simon Zaby
Keyword(s):  
Venture Capital ◽  
Success Factors ◽  
Total Sample ◽  
Venture Capitalists ◽  
Flow Of Funds ◽  
Start Up ◽  
Capital Financing ◽  
Proper Definition ◽  
Definition Of ◽  
Start Ups

This paper aims to investigate success factors of innovative start-up firms from the perspective of young start-up managers. Which key factors did they experience before and since the foundation of their company? The experience from the quite young Swiss start-up scene pro-vides important insights to entrepreneurs and policy-makers in emerging countries that cur-rently face the necessity of building up a start-up environment. One part of the data has been collected by the author, the other part originates from the Swiss Venture Capital Database (total sample size: 306). The results show a significant role of venture capital financing for the success of innovative start-ups. Interestingly, this is to some extent because the start-ups see various additional benefits from venture capitalists involved in their firm. Thus, the findings shed new light on a proper definition of venture capital that should not solely focus on the flow of funds.

Three Views of a Train Wreck

2016 ◽  
Author(s):  
Michael Kinch
Keyword(s):  
Public Health ◽  
Research And Development ◽  
Venture Capital ◽  
Food Chain ◽  
Early Stage ◽  
Health Benefits ◽  
Federal Spending ◽  
Moore’S Law ◽  
Government Grants ◽  
Start Ups

Despite and arguably because of the enormous public health benefits arising from the introduction of new medicines, the industry is in the midst of crisis. We detail in this chapter the decline in research and development efficiency, which has been termed “Eroom's Law,” a playful inversion of the bettern known Moore's Law of Computing. An explanation of declining efficiency follows as is a brief summary of some remedies taken by many biopharmaceutical entities, including the abandonment of therapeutics targeting particularly difficult indications such as Alzheimer's disease and antibiotics. We also convey how the industry has developed into a sort of food chain, with smaller companies and government grants supporting the earliest stages of research, which are then acquired by medium-sized companies, which in turn are consolidated into large companies. This food chain is fundamentally in doubt based on shrinking Federal spending on research combined with a decline in venture capital support for early-stage start-ups.

Venture Capital Communities

2019 ◽  
Vol 55 (2) ◽  
pp. 621-651 ◽  
Author(s):  
Amit Bubna ◽  
Sanjiv R. Das ◽  
Nagpurnanand Prabhala
Keyword(s):  
Machine Learning ◽  
Venture Capital ◽  
Computational Methods ◽  
Small Groups ◽  
Early Stage ◽  
Spatial Location ◽  
Venture Capitalists ◽  
Learning Tools ◽  
Physical Sciences

Although venture capitalists (VCs) can choose from thousands of potential syndicate partners, many co-syndicate with small groups of preferred partners. We term these groups “VC communities.” We apply computational methods from the physical sciences to 3 decades of syndication data to identify these communities. We find that communities comprise VCs that are similar in age, connectedness, and functional style but undifferentiated in spatial location. Machine-learning tools classify communities into 3 groups roughly ordered by their age and reach. Community VC financing is associated with faster maturation and greater innovation, especially for early-stage firms without an innovation history.

scholarly journals Financing entrepreneurship in times of crisis: Exploring the impact of COVID-19 on the market for entrepreneurial finance in the United Kingdom

2020 ◽  
Vol 38 (5) ◽  
pp. 380-390 ◽  
Author(s):  
Ross Brown ◽  
Augusto Rocha ◽  
Marc Cowling
Keyword(s):  
United Kingdom ◽  
Real Time ◽  
Entrepreneurial Finance ◽  
Time Data ◽  
Face To Face ◽  
Policy Interventions ◽  
The United Kingdom ◽  
Real Time Data ◽  
Start Ups ◽  
The Impact

This commentary explores the manner in which the current COVID-19 crisis is affecting key sources of entrepreneurial finance in the United Kingdom. We posit that the unique relational nature of entrepreneurial finance may make it highly susceptible to such a shock owing to the need for face-to-face interaction between investors and entrepreneurs. The article explores this conjecture by scrutinising a real-time data source of equity investments. Our findings suggest that the volume of new equity transactions in the United Kingdom has declined markedly since the outbreak of the COVID-19 pandemic. It appears that seed finance is the main type of entrepreneurial finance most acutely affected by the crisis, which typically goes to the most nascent entrepreneurial start-ups facing the greatest obstacles obtaining finance. Policy makers can utilise these real-time data sources to help inform their strategic policy interventions to assist the firms most affected by crisis events.

scholarly journals Influence of Venture Capital and Knowledge Transfer on Innovation Performance in the Big Data Environment

2019 ◽  
Vol 12 (4) ◽  
pp. 188 ◽  
Author(s):  
Chuanrong Wu ◽  
Xiaoming Yang ◽  
Veronika Lee ◽  
Mark E. McMurtrey
Keyword(s):  
Big Data ◽  
Knowledge Transfer ◽  
Venture Capital ◽  
New Product ◽  
User Preferences ◽  
Innovation Performance ◽  
Venture Capitalists ◽  
New Knowledge ◽  
Data Environment ◽  
Start Ups

Technological innovation requires large investments. Venture capital (VC) is a prominent financial source for innovative start-ups. A venture capitalist will inevitably transfer knowledge to facilitate the innovation of a firm while monitoring and advising its portfolio companies. Only when a firm has its own valuable new knowledge and high growth potential would venture capitalists select it. At the same time, big data knowledge, such as customer demands and user preferences, is also important for the new product development of a firm in the big data environment. Therefore, private knowledge transferred from venture capitalists, new knowledge developed independently by a firm itself, and big data knowledge are the three main types of knowledge for venture-backed firms in the big data environment. To find the influences of VC and knowledge transfer on the innovative performance of venture-backed firms, a model of maximizing the present value of the expected profit of new product innovation performance of a venture-backed firm in the big data environment is presented. The model can help venture capitalists to determine the scale of investment and the optimal exit time and predict the internal rate of return (IRR). This model can also help innovative start-ups to illustrate the value and prospects of a project to attract investment in their business prospectus.

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