Venture Capital Investment Research Articles

Strategies of unicorn startups: how these positive deviants compare to early-stage and Fortune 500 ventures

PurposeThe purpose of this paper is to begin to explore the strategic priorities of unicorn ventures as pursuers of market disruption. This study approaches this task by drawing on the positive deviance concept for studying outliers with the intent of understanding the strategic priorities of these ventures.Design/methodology/approachThis is a comparison study of the priorities of 75 unicorn ventures, 37 early-stage ventures and 45 Fortune 500 organizations. The authors use computer-aided text analysis to conduct within-sample and between-sample means comparison tests of 12,487 newswires from 2022.FindingsWhere early-stage ventures emphasize their mission, and Fortune 500 companies emphasize financial results, unicorn ventures, occupy the middle of the spectrum, balancing their priorities between pursuing market disruption and achieving financial results. These high-growth outliers indicate their priorities by using significantly less positive tone, affective and prosocial language, and focusing less on corporate social responsibility initiatives, compared to early-stage ventures (and using more of this language compared to Fortune 500 ventures). An additional finding emphasizes that public Fortune 500 companies focus significantly more on money than their topic of interest.Originality/valueThis work has implications for understanding the strategic priorities of entrepreneurial ventures in different development stages. The results suggest that unicorn ventures actively work to balance their startup mission, which allows them to experience high-growth and achieve market disruption, with the financial demands of venture capital investors. This novel conclusion demonstrates the value of using positively deviant outlier cases, such as unicorn ventures, as a viable sample for studying market disruption.

Venture Capital in US Medicine: A Briefing for Radiologists

In recent years, there has a been a rapid and significant drop in the number of private practices in US radiology. Many factors have driven this change. One of the most important has been the corporatization of practices. In many cases, this involves third-party financing, one type of which is venture capital. This article will provide an introduction to the venture capital investment model for medical professionals.

Gender diversity effects on investment decisions: a study of Shark Tank

PurposeThis paper investigates gender disparity in investment decisions within the popular American TV show Shark Tank.Design/methodology/approachThe research uses a comprehensive dataset of 925 pitches from 14 seasons and 316 episodes, covering August 2009 to May 2023.FindingsContrary to previous studies, the findings indicate that female entrepreneurs do n'ot face discrimination in terms of their pitching success rates, regardless of their industry affiliation. However, the authors did observe that female entrepreneurs tend to receive lower valuations, both self-assessed and in final deals. This suggests a self-imposed gender gap in venture capital and angel investing, likely stemming from lower entrepreneurial aspirations among women.Originality/valueTo tackle this issue, the authors propose promoting female venture capital by increasing the representation of female entrepreneurs and business angels on Shark Tank. Such role models can inspire aspiring women in these fields. Additionally, the authors believe that mixed-gender founder teams, comprising both men and women, can play a significant role in developing promising startups with viable business models.

Assessing the Climate Performance Potential of Start-ups: Insights and Guidance on Environmental Sustainability Assessment of Young Ventures

The role of early-stage venture capital (VC) investment in financing for ambitious climate action is often overlooked. In the developing field of climate-tech investment, one of the biggest challenges is to identify the start-ups and business models that contribute to climate change mitigation. The potential of a start-ups business model to reduce greenhouse gas emissions is defined as the start-ups climate performance potential (CPP). The assessment of a start-up’s CPP could enable start-ups and VC investors to invest in a more informed way with greater precision, impact, and purpose. The objective of this paper can be expressed in two steps: First, to gain insights into and identify the potential for improvement in the environmental sustainability assessment practices of VC firms through an exploratory case study. Second, to provide life cycle-based guidance on environmental sustainability assessment of innovative products offered by start-ups to determine their CPP, by eliciting appropriate criteria and procedures for directionally sound assessment. For this, the assessment approach developed by the climate-tech VC firm World Fund was used for the exploratory case study. In a first step, the CPP assessment process was described, based on document review and observation. Next, the CPP carbon footprint method was compared with ISO standardizations of life cycle assessment (LCA) and carbon footprint (CF) along eight criteria. Development potential was identified and discussed for seven of the eight criteria, including, for example, the use of scenarios, the complexity of meta-analyses, and the need to avoid misleading incentives.

Oi: 10.26118/2782-4586.2023.78.24.005 История развития рынка венчурных инвестиций в Китае

Цель исследования: провести анализ истории развития рынка венчурных инвестиций в Китае и рассмотреть аспекты его формирования. Методология: в статье применялись различные методы исследования: статистическое наблюдение, метод анализа и синтеза, системный подход, методы группировки и сравнений, метод сбора фактов и другие. Результаты: проведен анализ истории развития рынка венчурных инвестиций и было получено представление об основных аспектах его формирование. Выводы: современная венчурная экосистема Китая стремительно развивается благодаря активной деятельности основных венчурных фондов. Синергия между венчурными фондами и технологическими гигантами Китая стимулирует появление новых инноваций и технологий в различных отраслях, включая искусственный интеллект, финансовые технологии, электронную коммерцию и многое другое. Благодаря их действиям регион привлекает инвестиции и талантливых предпринимателей из разных стран, что способствует его экономическому росту и укреплению позиции Китая на мировой арене.

The evolution of k-shell in syndication networks reveals financial performance of venture capital institutions

Venture capital (VC) is a relatively newly emergent industry that is still subject to large uncertainties in China. Therefore, building a robust social network with other VC institutions is a good way to share information, various resources, and benefit from skill and knowledge complementarity to against risks. Strong evidences indicate that better networked VC institutions are of a better financial performance, however, most of previous works overlook the evolution of VC institutions and only focus on some simple topology indicators of the static syndication network, which also neglects higher-order network structure and cannot give a comprehensive evaluation. In this paper, based on VC investment records in the Chinese market, we construct temporal syndication networks between VC institutions year by year. As k-shell decomposition considers higher-order connection patterns, we employ k-shell as an evaluation of the influence of VC institutions in syndication networks. By clustering time series of k-shell values, the VC institutions in China fall into five groups that are quite different from each other on financial performances and investment behaviors. This, in turn, proves the power of our method that only based on proper sequential network properties, we can reveal their financial investment performance. Compared to other network centrality measurements, k-shell is a better indicator that is indicated by a smaller intra-group distance and a larger inter-group distance.

Rizikos kapitalo investicijų poveikio šalių darbo produktyvumui vertinimas

The study expands and complements the theoretical and practical aspect of relevant scientific research on the impact of venture capital investments on the countries labour productivity. Researchers have found that innovation leads to the growth of countries labour productivity because innovation creates new products and technologies. It has been established that innovation is closely related to venture capital investments. With the help of innovations that require venture capital investments, a larger production volume is produced, which is associated with an increase in labour productivity. Ensuring financing of innovative companies has a positive external impact on the economy and, at the same time, on labour productivity, so it makes sense for governments to take measures to increase the volume of venture capital investments. Considering to the gap of research on the assessment of the impact of venture capital investments on labour productivity at the macroeconomic level, this article assesses the impact of venture capital investments on labour productivity in the EU-25 countries. Keywords: venture capital investments, EU countries, innovation, labour productivity.

An extended hesitant fuzzy set for modeling multi-source uncertainty and its applications in multiple-attribute decision-making

Handling uncertainty has always been a pervasive and formidable challenge in the realm of multiple-attribute decision-making (MADM). Hesitant fuzzy set (HFS) can retain several different values, making it a useful tool for expressing the uncertainty experienced by decision-makers (DMs). Recently, the introduction of the normal wiggly hesitant fuzzy set (NWHFS) has aimed to uncover potential uncertain information within HFS, and it has been empirically demonstrated to enhance the rationality of MADM. However, it is essential to acknowledge the role of probabilistic information, which assesses the likelihood of evaluation values occurring and is a factor that cannot be ignored in MADM. In this current study, we propose an innovative approach known as the mixed-normal-based hesitant fuzzy set (MNHFS), considering both probabilistic information and the potential uncertainty. To distinguish MNHFSs in MADM, we defined a score function and distance measures. Subsequently, we apply the proposed MNHFS to TODIM (an acronym in Portuguese for interactive and multiple attribute decision-making) and investigate its validity and superiority in a case study involving the selection of a promising venture capital investment. Finally, we provide a visualization method to illustrate the internal uncertainty of the decision results and offer insights into investment risk.

Development of a Methodology for Analyzing the Effectiveness of Venture Capital Investment Based on Option and Fuzzy-Sets Approaches

Development of a Methodology for Analyzing the Effectiveness of Venture Capital Investment Based on Option and Fuzzy-Sets Approaches

Legal principles of venture investment into startups as innovative product

Problem setting. The article is focused on determining legal principles of venture investment into startups as innovative product. The relevance of the topic is due to the fact that the main obstacle for the development of startups in Ukraine is the lack of permanent and systematic investments, the development of venture entrepreneurship, scientific research in the area of venture investment. analysis of recent researches and publications. Economists, in particular I. V. Lytvyn and Y. V. Bulak, drew attention to the state of venture capital entrepreneurship under martial law. The problem of venture capital investment was studied in detail by Y. M. Zhornokuy, who determined that the use of venture capital to invest in innovation in Ukraine is underdeveloped. According to B. Derevyanko, Ukrainian venture capital funds do not take into account the peculiarities of the nature of venture capital investment. The origins of the legal support of venture capital investment were identified by D. V. Zadychailo. The implementation of venture relations through investment agreements was the subject of research by O. E. Simson. Purpose of the research is to determine legal principles of venture investment into startups as innovative product. article’s main body. Venture entrepreneurship is activity with a special risk, since it is aimed at making investments into scientific and technical result intelligence. It has been emphasized that venture investment in terms of the martial law acquires a special scientific and practical importance for the post-war recovery of the Ukrainian economy and the development of society. It has been proved that startup’s criteria established by the legislator are close to the criteria for protecting the objects of intellectual property rights, in particular objects of industrial property (inventions, utility models). Therefore, one of the startup’s legal features is its correlation with the corresponding object of intellectual property law, which has received state registration. At the same time, the startup, despite receiving legal protection, is not embodied in a certain production, scientific and practical intelligence is still being conducted in its regard. It has been emphasized that the lack of a sustainable practice of using startups indicates the existence of risk regarding its investment. As a result, a startup can be defined as an object with elements of risk for its further implementation. It has been argued that startups can be considered as innovative product. It has been revealed that a startup’s implementation as an innovative product has certain specific features stipulated by the economic cycles (stages) of its creation and implementation. Each of the identified stages has legal significance, since it can be correlated with the competitive selection of startups to receive investments, in particular due to financial state support. At the same time, both scientific technical and entrepreneurial activities in the field of venture investment take place at each of the stages of a startup’s implementation as an innovative product. The importance of the activities of the Innovation Development Fund (Ukrainian Startup Fund) has been emphasized, which allows startups to receive state investment, since investing into this innovation is significantly risky. Therefore, the state creates appropriate stimulating mechanisms for the creation of the startup market. conclusions and prospects for the development. Summarizing the above, we offer conclusions that startup is a new legal category that needs further scientific studies. Based on the conducted research, we have distinguished the following characteristics of a startup as an object of rights: it is the result of scientific and technical creativity; has state registration as an object of intellectual property rights; has not been implemented into systematic production; has novelty for the relevant market of goods and services; refers to objects with increased risk; has the dual legal nature both of an innovation and a separate investment project. We have offered the division of startups depending on intellectual property institutions: a) startups in the field of copyright (computer software, databases); b) patent and legal startups (inventions, utility models, industrial designs); 3) startups in the field of non-traditional intellectual property objects (new varieties of plants, layout of an integrated microcircuit).

How Does Policy Uncertainty Affect Venture Capital?

Abstract This paper examines the effect of policy uncertainty on venture capital (VC) investment. Relying on plausibly exogenous variation in policy uncertainty caused by closely contested U.S. gubernatorial elections, we find that policy uncertainty negatively affects VC investment. The effect is more pronounced if VC investment is subject to higher illiquidity. However, some distinctive features of VCs (strategic motives, intensive post-investment monitoring, and preferences for early-stage and high-tech ventures) mitigate the effect of policy uncertainty, distinguishing the effect of policy uncertainty on VC investments (in private markets) from that in public markets. Our findings shed new light on the real effects of policy uncertainty in private markets. (JEL G24, D81, M13) Received: June 17, 2020; Editorial decision: June 27, 2023 by Editor: Andrew Ellul

Venture Capital Exits and Investments: The Influences of Market Run-up, Market Timing, and Media Attention

In this paper, we address the question of whether venture capital (VC) firms are able to add value through exit and investment timing. Considering all venture-backed exits, we find that VCs are able to time the initial public offerings (IPOs) to occur after market run-ups. However, we find no evidence that VCs can time IPOs to precede low or negative market returns. Focusing on the biotech sector, we do find evidence of successful market timing in that IPO activity is highest following market run-ups and before periods of low market returns. Controlling for leading and lagging market returns, we find little evidence that media attention influences IPO exit timing. As to new VC investments in biotech, we find that when market returns are low (high), VCs focus their investments in the sector on earlier (later) investment rounds with longer (shorter) times to anticipated harvesting.

Venture capital as a way to develop an innovative model of the Russian economy

The article studies the way to develop an innovative model of the Russian economy by organizing venture capital investment. The purpose of the study is to analyze structural changes in the venture investment mechanism in Russia that have been occurring against the background of Russia’s special operation in Ukraine since February 24, 2022. The objectives of the study include identifying the role and significance of venture capital in the Russian economy transformations. The author used the methods of statistical, financial, dialectical and logical analysis. The system approach is fundamental, as it allowed to identify all the essential characteristics of structural changes in venture investment mechanism in the changed economic environment. The time period of the study is 2017–2022. The study analyzes the data from international organizations, analytical centers, mass media, and official sources. A review of the literature has been made and various approaches of scientific research considered. The main functions of venture capital have been highlighted and sources of its formation by directions given, and differences in the regulatory framework governing the Russian and other countries’ venture capital industry identified.

A Study on the Factors Affecting Investment Decision of Venture Capitalist

This article examines the importance of venture capital to the financial industry and the world economy over the past 30 years. Venture capital is a powerful driver of the U.S. economy and the world economy. Further, this paper cites the research results of different authoritative authors from SSRN for a comprehensive discussion. The data source of this paper mainly uses the form of a questionnaire survey. This article mainly explores the standards and procedures used by eight venture capital firms when making investments. These criteria are generating deal sourcing, investment selection decision, tools and factors in the evaluation, contracting and structuring the investments, monitoring and post-investment value-added, VCs' exit, firm internal structure, and relationships. In the end, this paper refers to the importance of factors for venture capital firms to make decisions in different periods. Comparing different research results, it is shown that not only eight factors are the factors that determine venture capital firms' investment decisions, but also luck is part of the reference factor.

Venture Capital Investment Success: A Study of the Factors that Matter

Venture capital funding is essential for emerging businesses because it allows them to gain access to capital and other resources necessary for growth. VC firms play an important role in economic growth because they inspire innovative thinking and provide funding for startups to develop marketable products and cutting-edge technologies. Consequently, it is essential for venture capitalists to take into consideration relevant aspects before investing in order to increase the proportion of investments that are successful. Through literature analysis which has revealed that there are six key components to a successful venture capital firm: the team, the syndication, the valuation, the value-add, the interaction with investors, and the exits. Importantly, venture capitalists place more weight on the selection of transactions than on the selection of investments. Rather than considering a company's track record or product offerings, investors will place greater emphasis on the management team behind the venture. Many venture investors subscribe to the old adage that investing in a mediocre idea with excellent management is better than a fantastic business strategy with inexperienced management because a team with competent and experienced employees will play a significant part in the firm's growth. Even while it's crucial to choose your transactions carefully, value can also be created by the addition of new elements after an investment has been made.

Trend Evaluation of Venture Capital Investment in Mainland Chinas Semiconductor Industry

As chips become more prevalent in daily life, many countries understand that in order to become self-sufficient, they must build their own semiconductor supply chains. China, a country that has stalled behind in developing chips, is also aware of this. To this end, the government started vigorously promoting investments in semiconductors, turning them into popular business opportunities. Venture capitalists (VC), who typically prefer high risks but greater returns, are responsible for the greatest growth. They think that even though politics and technology have placed restrictions on the industry, there is still room for growth in the semiconductor market. This paper breaks down the recent trends in the semiconductor industry of mainland China, with a particular focus on sensitive points such as political treaties and social phenomena. According to results, the mainland semiconductor industry merits attention and has a promising future. Venture capitalists should look for companies with the following characteristics: highly educated and experienced employees, the ability to design chips independently, and a stable supply chain.

What Does Venture Capitalists Learn From IPO Failures?

Venture capital investors focus on early-stage enterprises, the market participants have limited information about their prospects. Their investment decisions involve complicated factors and potentially the failures in the past can affect their future investment decisions. In this paper, within the context of venture capital investment, I examined the impact of the rate of IPO failures in one sector on future investment in the same sector. However, the direction of effect is ambiguous. The learning effect from past failure can be positive if the VC investors gain valuable experience from it. Alternatively, the learning effect can be negative as it reveals the VCs incapability to invest in that given sector. I exploit a data set from Preqin and a fixed-effect model to help me identify results that are consistent with a positive learning story. This finding contributes to our understanding of how VC investors make investment decisions and how financial market participants react to failures more broadly.

Going public and innovation: Evidence from the ChiNext stock market

Innovation can drive corporate value and enhance competitiveness. Due to the high risks, long-term nature, and exclusivity of innovative projects, it is difficult for companies to meet R&D (Research & Development) investment needs through internal funding. An IPO (Initial Public Offering) represents the first major liquidity event in a firm’s lifecycle since founders and initial investors realize value from the sale of their equity stakes and consequent diversification of ownership. Firms raise funds from investors in the capital market through initial public offerings (IPOs), which serve as an essential means of corporate financing. Based on this, this paper investigates the effects of going public on innovation using the Difference-in-Differences approach. The treatment group comprises public firms on the ChiNext stock market between 2010 and 2016. As a control group, non-listed firms submitted IPO applications to the China Securities Regulatory Commission (CSRC) but failed during the same period. Consequently, the final data is collected from 2007 to 2019, encompassing the three years pre and post-IPO periods. We find going public can prompt corporate innovation, and this positive effect is achieved through three channels: alleviating financing constraints, accumulating human capital, and mitigating agency problems. Heterogeneity analysis reveals that the positive relation is more pronounced in non-high-tech firms, higher competitive industries, weaker intellectual property protection firms and the growth-stage firms. Taking into account the characteristics of IPO, we find that the promotion of corporate innovation is more pronounced in samples with pre-IPO venture capital or private equity investments and lower levels of underpricing during IPO. Additionally, the increased innovation induced by IPO positively impacts long-term value and total factor productivity. The analysis reveals a complex trade-off between public and private ownership. It enriches the research on the impact of IPO behavior on innovation and provides new empirical evidence to improve the multi-level capital market.

Common Venture Capital Investors and Startup Growth

Abstract We exploit the staggered introduction of liability waivers when investors hold stakes in conflicting business opportunities as a shock to venture capital (VC) investment and director networks. After the law changes, we find increases in within-industry VC investment and common directors serving on startup boards. Despite the potential for rent extraction, same-industry startups inside VC portfolios benefit by raising more capital, failing less, and exiting more successfully. VC directors serving on other startup boards are the primary mechanism associated with positive outcomes, consistent with common VC investment facilitating informational exchanges in VC portfolios. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Shared mental models: a new approach to understanding entrepreneurs’ and investors’ representations

ABSTRACT The literature on venture-capital investment and entrepreneurship has demonstrated the important role played by mental representations in the entrepreneur – investor relationship. This research draws on shared mental model (SMM) theory to structure a comparative analysis of investor and entrepreneur representations regarding success and the factors that influence it. Through 16 interviews conducted with four entrepreneur – investor pairs, we highlight the need to study representations in greater depth in order to identify potential misalignments. We demonstrate the relevance of SMMs and the use of cognitive maps in capturing and comparing actors’ representations through multi-level and multi-approach analysis.