When Are Venture Capital Projects Initiated?

44 Pages Posted: 20 Feb 2008 Last revised: 8 Apr 2012

Yong Li

State University of New York at Buffalo

Joseph T. Mahoney

University of Illinois

Date Written: September 18, 2009

Abstract

This paper examines how public market information relates to the initiation of venture capital projects. Analysis of venture capital investments in the U.S. between 1980 and 2007 indicates that venture capitalists tend to defer new investment projects in target industries with substantial market volatility. This delay effect of market volatility is reduced if the target industry experiences high sales growth or if competition among venture capitalists is intense in the target industry. The paper provides further evidence to corroborate the view that venture capitalists rationally respond to market shifts in their investment decisions.

Keywords: Venture capital, real options, investment timing, uncertainty, growth, and competition

JEL Classification: G24, M13

Suggested Citation

Li, Yong and Mahoney, Joseph T., When Are Venture Capital Projects Initiated? (September 18, 2009). Journal of Business Venturing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1095322

Yong Li (Contact Author)

State University of New York at Buffalo ( email )

326 Jacobs Management Center
Amherst, NY 14260
United States

Joseph T. Mahoney

University of Illinois ( email )

1206 South Sixth Street
339 Commerce West
Champaign, IL 61820
United States
217-244-7969 (Phone)
217-244-4102 (Fax)

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