Start-up Investment With Scarce Venture Capital Support

Item Type Journal paper
Abstract

Venture capitalists, representing informed capital, screen, monitor and advise start-up entrepreneurs. The paper reports three new results on venture capital (VC) finance and the evolution of the VC industry. First, there is an optimal VC portfolio size with a trade-off between the number of companies and the value of managerial advice. Second, advice tends to be diluted when the industry expands and VC skills remain scarce in the short-run. The delayed entry of experienced VCs eventually restores the quality of advice and leads to more focused company portfolios. Third, as a welfare result, VCs tend to provide too little advisory effort and to invest in too few companies. Testable implications are also discussed.

Authors Kanniainen, Vesa & Keuschnigg, Christian
Journal or Publication Title Journal of Banking and Finance
Language English
Keywords Venture capital, company portfolio, managerial advice, economic rents.
Subjects other research area
HSG Classification not classified
Refereed No
Date 1 August 2004
Publisher Elsevier
Place of Publication Amsterdam
Volume 28
Number 8
Page Range 1935-1959
Number of Pages 25
ISSN 0378-4266
ISSN-Digital 1872-6372
Publisher DOI 10.1016/j.jbankfin.2003.07.005
Depositing User Wolfgang Lechthaler
Date Deposited 15 Dec 2004 13:03
Last Modified 23 Aug 2016 10:52
URI: https://www.alexandria.unisg.ch/publications/2131

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Citation

Kanniainen, Vesa & Keuschnigg, Christian (2004) Start-up Investment With Scarce Venture Capital Support. Journal of Banking and Finance, 28 (8). 1935-1959. ISSN 0378-4266

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https://www.alexandria.unisg.ch/id/eprint/2131
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