Toward a Model of Venture Capital Investment Decision Making

Fried, Vance H.; Hisrich, Robert D.

doi:10.2307/3665619

Cited by 534 publications

(374 citation statements)

References 25 publications

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“…In research on venture capital and business angels, there is often reference to the investment process, modeled somewhat differently by Tyebjee and Bruno (1984), Fried and Hisrich (1994) and Paul et al (2007). Drawing on all three, the process starts with the origination of potential investments in the form of projects or startups.…”

Section: How Crowdfunding Handles Different Investment Stagesmentioning

confidence: 99%

The role of crowdfunding in entrepreneurial ventures: an analysis of recent trends in Sweden

Silver¹,

Berggren

Fili

2016

Investment Management and Financial Innovations

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This is the published version of a paper published in Investment Management and Financial Innovations. Citation for the original published paper (version of record):Silver, L., Berggren, B., Fili, A. (2016) The role of crowdfunding in entrepreneurial ventures: an analysis of recent trends in Sweden. The financing of entrepreneurial ventures has been at the forefront of academic debate as well as policy-making discussion for almost a century. In general, there seems to be an agreement that the risks associated with business startups are higher than for mature firms, hence, these ventures will have to pay a higher interest rate than more mature and large firms. In this paper the authors analyze the role of a relatively new form of financing for entrepreneurial ventures -crowdfunding -and how this form of financing is similar and different from traditional sources of finance. The authors are also presenting different forms and models of crowdfunding available on the market together with illustrations from the crowdfunding industry in Sweden. The analysis indicates that the positive effects with crowdfunding are numerous but that the size of the crowdfunding sector is relatively small in comparison with the banking and venture capital industry. Investment Management and Financial

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Section: How Crowdfunding Handles Different Investment Stagesmentioning

confidence: 99%

The role of crowdfunding in entrepreneurial ventures: an analysis of recent trends in Sweden

Silver¹,

Berggren

Fili

2016

Investment Management and Financial Innovations

View full text Add to dashboard Cite

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“…12 The reason that eliminating likely losers does not lower the standard deviation is that this filtering eliminates the thick bottom tail of the lognormal distribution, leaving the long (high variance) upper tail.…”

Section: Model Implicationsmentioning

confidence: 99%

“…11 Because k 1−w < 1, the probability a venture capitalist loses money is slightly higher than 36.0%. 12 The standard deviation for the venture capitalist is damped slightly because k 1−w < 1.…”

Section: Model Implicationsmentioning

confidence: 99%

The Simple Analytics of Informed Finance

Bernhardt

Krasa

2005

SSRN Journal

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The paper derives two analytical consequences of informed finance: Equity leads to under-financing, while debt leads to over-financing. We show that our model can explain key qualitative and quantitative features of informed venture capital finance in the United States. Using only four model parameters we match: (1) the venture capitalist's equity share; (2) the venture capitalist's expected return and (3) its standard deviation; (4) the probability that a project receives funding; and (5) the probability the venture capitalist loses money on an investment. Our estimated parameters reveal the average quality of an unfunded project; the percentage of uncertainty resolved by the venture capitalists investigation; the percentage of total surplus accruing to the venture capitalist, and the magnitude of underfinancing associated with venture capital finance. * Dan Bernhardt gratefully acknowledges financial support from NSF grant SES-0317700. Stefan Krasa gratefully acknowledges financial support from NSF grant SES-0318394 and NCSA computation grant SES050001. We are grateful to Per Stromberg for helping us uncover the relevant empirical regularities.

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“…The board is a major mechanism through which the venture capitalist can monitor and control the actions of the funded firm (Fried & Hisrich, 1994). To illustrate, Kaplan and Stromberg (2000) found that venture capitalists explicitly negotiate the size of the funded firm's board and its composition.…”

Section: Cognitive Institutional Impact On Governancementioning

confidence: 99%

“…However, despite the lessening of the financial interconnections that come from syndication, strong interconnections among U.S. venture capitalists continue. For example, it continues to be common practice for a venture capitalist in the U.S. to seek advice from venture capitalists at other firms (Fried & Hisrich, 1994), or to cooperate in monitoring of investments . Fried and Hisrich (1995) highlighted the role of these interconnections in the development of similarities among venture capitalists.…”

Section: Introductionmentioning

confidence: 99%

Venture Capitalists in Asia: A Comparison with the U.S. and Europe

Bruton

2002

SSRN Journal

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Toward a Model of Venture Capital Investment Decision Making

Cited by 534 publications

References 25 publications

The role of crowdfunding in entrepreneurial ventures: an analysis of recent trends in Sweden

The role of crowdfunding in entrepreneurial ventures: an analysis of recent trends in Sweden

The Simple Analytics of Informed Finance

Venture Capitalists in Asia: A Comparison with the U.S. and Europe

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