Determinants of venture capital firms' preferences regarding the industry diversity and geographic scope of their investments

摘要: Abstract Competition is intensifying in the venture capital industry U.S. The number of firms (VCFs) tripled from 1980 to 1989. Supplier power (in form institutional investors such as pension funds) continues grow. Foreign has grown extent that commitments foreign VCFs exceeded domestic both 1988 and Further, alternative sources financing for entrepreneurs individual (“angels”), corporations, strategic alliances are increasingly viable options. face pressure seek lower risk investments, improve rates return, provide value new development. Surprisingly, few scholarly studies have begun investigate strategies aiming implement order deal with this increasing pressure. Building on premise decisions regarding product-market scope a key component firm strategy (Hofer Schendel 1978), study examined 169 identify factors might explain variations preferences diversity geographic their investments. sample, drawn California, Massachusetts, Texas, represented about 27% all U.S.-based 1987, year which data were gathered. In terms total size investment portfolio, average these was $69.8 million, statistically indistinguishable $65 million. Results indicate (1) specializing early stage ventures prefer less narrower relative other VCFs; (2) corporate (i.e., those owned by non-financial corporations), but broader non-corporate (3) larger greater than do smaller (4) provision small business companies (SBIC) VCF no impact associated preference scope. One implication results not homogeneous regards intended portfolios. This, turn, holds implications, only VCFs, also suppliers (limited partners), buyers (entrepreneurs), policy-makers. can longer rely haphazard schemes; they need attract virtue benefits offered portfolio strategy, superior investments via offering valueadded services know-how. Potential will want examine, example, return investing amounts several at one extreme versus making large very diversified extreme. suggest outcomes (timing, magnitude, riskiness returns) choosing alternatives vary widely depend great part involved. It be possible make wise choices without full examination own objectives profiles VCFs. Entrepreneurs most attractive consider should weigh being financed supported various VCFs' Knowing VCF's improves chances approaching selecting right fit and, set options, knowledge may difference between receiving timely manner. Finally, policy-makers able use forces influence Presently, concerns include gap seed capital, increased presence market, export promising innovative technology firms. All influenced pursued jockey position competitive market.