 The First Step of the Capital Flow from Institutions to Entrepreneurs: the Criteria for Sorting Venture Capital FundsAlexander Peter Groh and Heinrich von Liechtenstein European Financial Management, 2011, vol. 17, issue 3, 532-559 Abstract: We contribute to the knowledge of the capital flow from institutional investors via venture capital (VC) funds as intermediaries to their final destination, entrepreneurial ventures. To this end, we conduct a world†wide survey among limited partners to determine the importance of several criteria when they select VC funds. We find the top criteria to be the expected deal flow and access to transactions, a VC fund's historic track record, his local market experience, the match of the experience of team members with the proposed investment strategy, the team's reputation, and the mechanisms proposed to align interest between the investors and the VC funds. A principal component analysis reveals three latent drivers in the selection process: ‘Local Expertise and Incentive Structure’, ‘Investment Strategy and Expected Implementation’, and ‘Prestige/Standing vs. Cost’. It becomes evident that limited partners search for teams which are able to implement a certain strategy at a given cost. Thereby, they focus on an incentive structure that limits agency costs. Date: 2011 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:17:y:2011:i:3:p:532-559 Ordering information: This journal article can be ordered from Access Statistics for this article European Financial Management is currently edited by John Doukas More articles in European Financial Management from European Financial Management Association Contact information at EDIRC. |
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