Exploring the Effect of Venture Capital Instruments and Control Mechanisms on Growth of Venture Capital Fund: Empirical Evidence from Ghana

Suweiba Sulemana,Haibo Chen

doi:10.4236/ojbm.2019.71013

Abstract

The study investigated the effect of venture capital instruments and control mechanisms on the growth of venture capital fund for 100 venture capital firms in Ghana by employing a stepwise multiple linear regression. We found a positive and significant relationship between growth of venture capital fund and the two-distinct set of independent variables (venture capital instruments and control mechanisms). The variables, convertible redeemable preference, preferred equity and debt, and preferred and common equity contribute significantly as venture capital instruments to the growth of venture capital, while conversion control right, performance option and warranty option were identified as control mechanisms that significantly affect the growth of venture capital.

Highlights

The growing importance of Venture Capital in the life of start-up businesses, technologically focused ones cannot be overemphasized
The variables, convertible redeemable preference, preferred equity and debt, and preferred and common equity contribute significantly as venture capital instruments to the growth of venture capital, while conversion control right, performance option and warranty option were identified as control mechanisms that significantly affect the growth of venture capital
With respect to our findings, the most important refers to the actual deviation from the mean value for the variables used in the study

Summary

Introduction

The growing importance of Venture Capital in the life of start-up businesses, technologically focused ones cannot be overemphasized. Patterns of the investment capitalists strategic decision-making process are based on the knowledge acquired, and this takes the shape of diversification as the venture capitalisation gains experience over time in a given business environment. In this case, venture capital firms use their long-term experience in controlling possible investment risks while at the same time maintaining high. Evaluate and invest in high risk business investments that limited partners find challenging to invest indirectly It should, be noted that the venture capital industry has evolved from an ad hoc collection of pioneering investors into a sophisticated, fast paced and highly specialised industry. When considering the high degree of uncertainty involved in the venture capital industry, one should consider that rational decision-making model; which are only one way of coping with uncertainty

Objectives

Results

Conclusion