Investment into venture capital funds in Europe: An exploratory study

Simon Barnes and Vanessa Menzies

Venture Capital, 2005, vol. 7, issue 3, 209-226

Abstract: Insight into the flow of capital into venture capital (VC) funds is fundamental to our understanding of the overall flow of capital into entrepreneurial ventures. To understand the processes and criteria utilized by limited partners (LPs) in the selection of the VC funds in which they invest we studied 21 European fund-of-fund investment management firms that actively invest in VC funds. We have demonstrated that such LPs utilize structured selection processes and criteria that are comparable to those used by VCs themselves, but with important differences. Notably, we found that LPs build early consensus within the investment team via a stage we have termed ratification . In selecting VCs, quantitative measures of reputation via historical performance are important, consistent with previous findings, but we found that reputation also captures opinions from entrepreneurs, other LPs and other VCs. We found that nurturing informal relationships outside the formal limited partnership agreement is an important component of LPs' decisions to invest and that LPs may pre-allocate capital to VCs with whom a relationship exists already. We conclude that early relationship building with potential LPs is an essential prerequisite for VCs aiming to raise a first fund.

Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1080/13691060500258919 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:veecee:v:7:y:2005:i:3:p:209-226

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TVEC20

DOI: 10.1080/13691060500258919

Access Statistics for this article

Venture Capital is currently edited by Colin Mason and Richard T. Harrison

More articles in Venture Capital from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().