Application of fuzzy analytic hierarchy process in multi-criteria decision-making of venture capitalists

Abstract

This study aims to determine the factors of the venture capital investment process that may influence the multi-criteria investment process of venture capitalists in an emerging market like India. Firstly, we used the exploratory factor analysis to identify and analyse the consistency of several factors that may facilitate the adoption of multi-criteria decision-making (MCDM) techniques in an Indian venture capital industry. Secondly, fuzzy analytical hierarchal process (FAHP), a most suited technique for MCDM to handle the fuzziness, vagueness and multi-dimensionality, was adopted to assign the weights and prioritise the pre-defined criteria and sub-criteria. These findings indicate that venture capitalists' investment decision does not emphasise solely on entrepreneurial activities, product and market; however, economic and regulatory environment also plays a significant role in the venture capitalists' investment decision-making process. These results may help entrepreneurs to recognise their strengths in respective criteria before approaching a right venture.