How Do Philanthropic Venture Capitalists Choose Their Portfolio Companies?

21 Pages Posted: 19 Mar 2009 Last revised: 11 May 2010

See all articles by Mariarosa Scarlata

Mariarosa Scarlata

University of Surrey - Surrey Business School; ESADE Business School; London School of Economics & Political Science (LSE); University of Newcastle - Business School

Luisa Alemany

ESADE Business School

Date Written: February 15, 2009

Abstract

This paper examines the deal flow and screening process characterizing the philanthropic venture capital investment model. The practices explicitly adopted by philanthropic venture capitalists are then compared to those employed by traditional for-profit venture capitalists to understand whether the investment behaviour of the two investor categories is the same. By surveying the population of European and US philanthropic venture capitalists, results suggest that they originate and select deals similarly to traditional venture capitalists. However, they also adopt different deal origination criteria which are not traditionally used by venture capitalists, such as, incubation and direct creation of an organization in the event of not finding a suitable one. Furthermore, screening variables such as “deal terms” and “technology” are not considered to be as important as in the case of venture capital.

Keywords: Venture philanthropy, venture capital, social entrepreneurship

JEL Classification: G24, M13

Suggested Citation

Scarlata, Mariarosa and Alemany, Luisa, How Do Philanthropic Venture Capitalists Choose Their Portfolio Companies? (February 15, 2009). Available at SSRN: https://ssrn.com/abstract=1343563 or http://dx.doi.org/10.2139/ssrn.1343563

Mariarosa Scarlata (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 8DN
United Kingdom

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

University of Newcastle - Business School ( email )

5 Barrack Road
Newcastle upon Tyne, NE1 4SE
United Kingdom

Luisa Alemany

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

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