Diversification and size in venture capital investing

Emanuele Teti (), Alberto Dell’Acqua and Ada Bovsunovsky
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Emanuele Teti: Università di Pisa
Alberto Dell’Acqua: Bocconi University and SDA Bocconi
Ada Bovsunovsky: Bocconi University

Eurasian Business Review, 2024, vol. 14, issue 2, No 6, 475-500

Abstract: Abstract We empirically examine the interaction between different types of diversification (stage, industry, geography) and portfolio size, i.e., number of investee companies, in explaining venture capital (VC) funds’ returns. We study a comprehensive dataset of 422 liquidated US VC funds to conduct multiple analyses in a large timeframe. The results show that large portfolio size and diversification in a limited number of industries contribute positively to fund performance, while stage and geographical diversification have no significant relationship with returns. Our findings can support both the practice of VC portfolio management in reaching better capital allocation efficiency and policymakers in providing guidance for VC fund development programmes backed by sovereign and international institutions.

Keywords: Diversification; Size; Venture capital performance (search for similar items in EconPapers)
JEL-codes: G24 L26 M13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40821-024-00258-7

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