Venture Capitalists' Selection Process: The Case of Biotechnology Proposals

Posted: 10 Nov 2009

See all articles by Katleen Baeyens

Katleen Baeyens

Ghent University - Department of Accountancy and Corporate Finance

Tom R. Vanacker

Ghent University; University of Exeter Business School

Sophie Manigart

Vlerick Business School; Ghent University

Date Written: 2006

Abstract

The goal of this research is to determine how the riskynature of biotechnology ventures influences the investment decision process ofventure capitalists (VCs). First, the method of this qualitative study isdescribed: between October 2003 and February 2004, questionnaires andinterviews were conducted with Belgian venture capital managers. According tothe interviewees, biotech companies are characterized by a long path to amarket-ready product, regulatory difficulties, and a technology that isdifficult to understand. The data also give rise to two propositions, the first of which suggeststhat the selection criteria used by VCs depend on the characteristics of theinvestment proposal (e.g., stage of development and sector) and of the investor(e.g., independent versus captive, generalist versus specialist). According tothe second proposition, VCs require the same standard contractual terms inhighly uncertain environments as they do in more certain environments, but theymanage the uncertainty with post-investment monitoring and governance.(SAA)

Keywords: Investment criteria, Risk management, Management decisions, Biotechnology industry, Startups, Venture capitalists, Firm characteristics, Valuation, Risk assessment

Suggested Citation

Baeyens, Katleen and Vanacker, Tom R. and Manigart, Sophie, Venture Capitalists' Selection Process: The Case of Biotechnology Proposals (2006). International Journal of Technology Management, Vol. 34, Issue 2, p. 28-46 2006. Available at SSRN: https://ssrn.com/abstract=1503209

Katleen Baeyens (Contact Author)

Ghent University - Department of Accountancy and Corporate Finance ( email )

Bedrijfsfinanciering (RUG)
Kuiperskaai 55 E
Ghent, B-9000
Belgium

Tom R. Vanacker

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

University of Exeter Business School ( email )

Streatham Court
Exeter, EX4 4JH
United Kingdom

Sophie Manigart

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

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