Determinants of required return in venture capital investments: a five-country study
Manigart, Sophie De Waele, Koen Wright, Mike Robbie, Ken Desbrières, Philippe Sapienza, Harry J Beekman, Amy
Manigart, Sophie
De Waele, Koen
Wright, Mike
Robbie, Ken
Desbrières, Philippe
Sapienza, Harry J
Beekman, Amy
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2002-07
Journal
Journal of Business Venturing
Book
Publication Volume
17
Publication Issue
4
Publication Begin page
291
Publication End page
312
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Abstract
Using two complementary theoretical perspectives, we develop hypotheses regarding the determinants of the return required by venture capitalists and test them on a sample of over 200 venture capital companies (VCCs) located in five countries. Consistent with resource-based theory, we find that early-stage specialists require a significantly higher return than other VCCs when investing in later-stage ventures. Consistent with financial theory, we find that acquisition/buyout specialists require a significantly lower return than other VCCs when investing in expansion companies. Furthermore, in comparison to specialists, highly stage-diversified VCCs require a significantly higher return for early-stage investments. Independent VCCs require a higher rate of return than captive or public VCCs. In general, higher required returns are associated with VCCs who provide more intensity of involvement, have shorter expected holding period of the investment, and being located in the US or UK (in comparison to those in France, Belgium, and The Netherlands).
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Keywords
3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 3507 Strategy, Management and Organisational Behaviour