Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalistâ€™s Decision
Ashish Vazirani and
Journal of Entrepreneurship and Innovation in Emerging Economies, 2021, vol. 30, issue 2, 306-335
Investments in new ventures are risky due to lack of conventional form of quantitative information and untested products. Venture capitalists (VCs) are seen to target such new ventures for high-risk premium but with little success. Existing research has investigated and identified a variety of qualitative factors that impact VCsâ€™ investment decisions; however, many research gaps still exist. Works published in the last two decades show the evolution in the preference of factors with the focus shifting from ventureâ€™s team and product to factors such as intellectual property rights, economic crisis and social capital. It was found that the factorâ€™s role was limited to the binary scale (positive and negative), which undermines its effect. The purpose of this review is to provide a comprehensive framework of factors that influence VCsâ€™ investment decisions and show theoretical research gaps. Accordingly, we have segmented factors into two macro-categories: â€˜internalâ€™ and â€˜external environmentâ€™, and presented a detailed framework of the factors that influence VCsâ€™ investment decisions. Further, we argue to consider the subjectivity of qualitative factors and to explore the role of a factor in the decision-making.
Keywords: Venture capitalist; new venture; new venture investment; decision-making; qualitative factors (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jouent:v:30:y:2021:i:2:p:306-335
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