This paper presents an empirical study of the determinants that drive the investment performance of China’s venture capital (VC) and private equity (PE) funds. Using data on VC/PE funds backed initial public offerings (IPOs) from ChiNext between October 2009 to October 2011 and the internal rate of return (IRR) as the measurement for investment performance, this paper finds that fund experience has a positive influence on investment performance whereas investment scale and investment duration have a negative influence on investment performance.

This study investigates variability in the importance of investment decision criteria used by venture capitalists in assessing new technology-based ventures and relates the criteria to the subsequent performance of the investment in the new venture. Variability was measured using interval and ordinal scale approaches for both criteria ratings and rankings. The analyses found that the criteria used by venture capitalists form a general hierarchy that is consistently ranked across ventures. However, there are some criteria that do not form part of this hierarchy and whose importance varies depending on the specific venture being evaluated. The criteria that are consistently considered important by venture capitalists can be thought of as necessary conditions for investment. The hypotheses concerning the relationship between the criteria and subsequent deal performance are that:· deal performance can be assessed by venture capitalists earlier for Internet-related ventures than for other-technology based ventures (H1);· Internet-related ventures have more extreme levels of deal performance (H2);· a small number of criteria will distinguish between successful and unsuccessful deal performance (H3);· criteria that do distinguish have above average variability (H4); and· criteria related to first-mover advantage distinguish between successful and unsuccessful deals (H5). The study was conducted in two parts. The original study (n=100) conducted by Bachher (2000) gathered information about the importance of the investment criteria using a web-based survey. The follow-up study (n=40) gathered information about the success of the investments by surveying the original participants and gathering information from the Internet. Limitations of the study include a nonrandom sample, a small sample size for the follow-up survey and the very small number (n=5) of unsuccessful investments identified. Evidence for hypotheses H1 and H2 was in the predicted direction but failed to achieve statistical significance. The evidence is supportive of H3. Evidence for H4 and H5 was not found. Additional analysis of the results suggests that venture capitalists whose investments were ultimately unsuccessful placed less importance on technology-related criteria than did venture capitalists investing in the other ventures. This finding implies that venture capitalists need to perform detailed assessments of the technology of new ventures.

This paper examines cognitive repairs as they apply to the decision-making process used by venture capitalists, asking the question of “how could, or how do, cognitive repairs play a role in the decision-making process used by venture capitalists when evaluating a proposal for a new investment?” It begins by reviewing the well-documented concept of human decision-making biases and errors, and then shifts to an overview of the decision-making processes used by venture capitalists when evaluating a proposal for investment in a new venture. It then looks specifically at previous literature that identifies decision-making biases that venture capitalists fall prey to, and follows with reviewing the literature on cognitive repairs: organizational strategies that are used to compensate for or correct decision-making biases. Senior members of the venture capital industry were interviewed to empirically investigate this question, and it was found that while some strategies were in place to reduce human decision-making error, there was both room for and suggested evidence of a greater number of such errors. This leads to the suggestion that the increased use of cognitive repairs by venture capitalists could be beneficial, though this initial research is only of an exploratory format and warrants further investigation both more broadly and deeply.

In recent years, awareness of the climate change has increased around the world. Environmental issues have been taking into consideration, both by individuals and companies. Therefore the demands for new environmental friendly technology have increased, also known as cleantech. To further establish and develop cleantech it requires capital. Venture capitalists have as well seen the potential. To increase the number of Venture capital investments in cleantech, it is important the investments generate good returns. Venture capitalists obtain their returns when they exit an investment. The purpose of this essay is to describe the exit strategy Venture capitalists prefer, as well the relationship between exit strategy and the investment strategy for the Venture capitalist investing in the cleantech sector. The different type of exits we have studied are IPOs, trade sale and secondary sale. We identified investment strategies from existing theory which are linked to the Venture capitalist exit strategies. The investment strategies that we have identified for our study are value added activities, control, syndication, industry specialization, industry diversification, stage and geographical location. We used a quantitative analyze method for answering our thesis purpose and issue. We analyzed the relationship between Venture capitalists investment strategy and their preferred choice of exit in cleantech, based on our collected data. The results from the analysis indicated that Venture capitalist prefer a trade sale before IPOs and secondary sale in cleantech. We have also defined that venture capitalist that prefer an IPO do not prefer to invest in a specific geographical region in Sweden, but in opposite they do prefer to use control when their aim is to exit through an IPO in cleantech.

This study investigates variability in the importance of investment decision criteria used by venture capitalists in assessing new technology-based ventures and relates the criteria to the subsequent performance of the investment in the new venture. Variability was measured using interval and ordinal scale approaches for both criteria ratings and rankings. The analyses found that the criteria used by venture capitalists form a general hierarchy that is consistently ranked across ventures. However, there are some criteria that do not form part of this hierarchy and whose importance varies depending on the specific venture being evaluated. The criteria that are consistently considered important by venture capitalists can be thought of as necessary conditions for investment. The hypotheses concerning the relationship between the criteria and subsequent deal performance are that:· deal performance can be assessed by venture capitalists earlier for Internet-related ventures than for other-technology based ventures (H1);· Internet-related ventures have more extreme levels of deal performance (H2);· a small number of criteria will distinguish between successful and unsuccessful deal performance (H3);· criteria that do distinguish have above average variability (H4); and· criteria related to first-mover advantage distinguish between successful and unsuccessful deals (H5). The study was conducted in two parts. The original study (n=100) conducted by Bachher (2000) gathered information about the importance of the investment criteria using a web-based survey. The follow-up study (n=40) gathered information about the success of the investments by surveying the original participants and gathering information from the Internet. Limitations of the study include a nonrandom sample, a small sample size for the follow-up survey and the very small number (n=5) of unsuccessful investments identified. Evidence for hypotheses H1 and H2 was in the predicted direction but failed to achieve statistical significance. The evidence is supportive of H3. Evidence for H4 and H5 was not found. Additional analysis of the results suggests that venture capitalists whose investments were ultimately unsuccessful placed less importance on technology-related criteria than did venture capitalists investing in the other ventures. This finding implies that venture capitalists need to perform detailed assessments of the technology of new ventures.

This paper examines cognitive repairs as they apply to the decision-making process used by venture capitalists, asking the question of “how could, or how do, cognitive repairs play a role in the decision-making process used by venture capitalists when evaluating a proposal for a new investment?” It begins by reviewing the well-documented concept of human decision-making biases and errors, and then shifts to an overview of the decision-making processes used by venture capitalists when evaluating a proposal for investment in a new venture. It then looks specifically at previous literature that identifies decision-making biases that venture capitalists fall prey to, and follows with reviewing the literature on cognitive repairs: organizational strategies that are used to compensate for or correct decision-making biases. Senior members of the venture capital industry were interviewed to empirically investigate this question, and it was found that while some strategies were in place to reduce human decision-making error, there was both room for and suggested evidence of a greater number of such errors. This leads to the suggestion that the increased use of cognitive repairs by venture capitalists could be beneficial, though this initial research is only of an exploratory format and warrants further investigation both more broadly and deeply.

Venture Capital Contracts with Moral Hazard and Adverse Selection Abstract This study offers a discussion on the agency theory of venture capital, including the cases of one venture capitalist and one entrepreneur, one venture capitalist and two entrepreneurs, and two venture capitalists and one entrepreneur. The first model compares the effort levels of the two parties, one venture capitalist and one entrepreneur, when there is a double moral hazard problem. The results are as follows:(1)the effort levels under double moral hazard are lower than those under full information¡Ano matter if the contract is common stock or convertible debt ; (2) a suitably chosen convertible debt contract outperforms a common stock contract; and (3) in the equilibrium, the venture capitalist¡¦s net compensation is equal to his cost of capital. Secondly, the study extends to a double side moral hazard problem between one venture capitalist and two entrepreneurs. The results show: (1) the effort levels under double moral hazard are still lower than those under full information in the model; (2) one venture capitalist and two entrepreneurs will come up with a double moral hazard problem if they sign the common stock contract; and (3) the incentive to lessen the double moral hazard problem is the total profit shared conditionally by one venture capitalist and two entrepreneurs. Finally, this study develops a joint investment framework with an adverse selection problem. One entrepreneur is informed about the project¡¦s potential profitability but two venture capitalists are not .The results show:(1)if the entrepreneur reveals his private information, the individual management cost of two venture capitalists will be equal; (2)if the entrepreneur does not reveal his private information, the individual management cost of the two venture capitalists will be higher in an uncooperative situation; and (3)if the entrepreneur does not reveal his private information, the venture capitalists¡¦ effort levels will be higher in case their management knowledge is of substitutive nature than that of complementary nature. Key words¡Gventure capital, moral hazard, adverse selection

none

This paper examines the timing of initial public offerings and private placements by venture-backed companies. Using a sample of 187 venture-backed IPOs and private placements in a variety of industries between 1991 and 2000 over TSEC and OTC, we find that these companies go public when equity valuationsare high and employ private placements when values are lower. Seasoned venture capital appears to take firms public when industrial equity valuations are higher than their less experienced counterparts. The results are robust to differential specifications of control variables.

none