Venture Capital Staging: Domestic VC-Led versus Foreign VC-Led Investments

Oxford Handbook of Venture Capital, Forthcoming

26 Pages Posted: 6 May 2012 Last revised: 8 Oct 2012

Yong Li

State University of New York at Buffalo

Date Written: May 6, 2012

Abstract

How do domestic VC-led and foreign VC-led investments differ in staged financing? We propose that domestic VCs will be more active than foreign VCs in learning through investing to tackle information asymmetry, agency concerns and project-specific uncertainty. We further expect that domestic VCs will be more responsive than foreign VCs to changes in external environment. The empirical analysis indicates that agency concerns and project-specific uncertainty (as reflected in early-stage ventures) prompt VCs to accelerate staging, whereas market volatility delays each round of financing. We further find some differences between domestic VC-led and foreign VC-led investments: Domestic VCs tend to invest in early-stage ventures with shorter durations between rounds of financing than do foreign VCs, and the delay effect of market volatility is also much more salient for foreign VC-led investments.

Keywords: cross-border venture capital, staging, agency, uncertainty, real options

Suggested Citation

Li, Yong, Venture Capital Staging: Domestic VC-Led versus Foreign VC-Led Investments (May 6, 2012). Oxford Handbook of Venture Capital, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2051534 or http://dx.doi.org/10.2139/ssrn.2051534

Yong Li (Contact Author)

State University of New York at Buffalo ( email )

326 Jacobs Management Center
Amherst, NY 14260
United States

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