Download this Paper Open PDF in Browser

Early Indicators of Fundraising Success by Venture Capital Firms

43 Pages Posted: 21 Aug 2017 Last revised: 27 Aug 2017

Henry Lahr

The Open University - Business School; University of Cambridge - Centre for Business Research (CBR)

Timothy E. Trombley

San Diego State University

Date Written: August 16, 2017

Abstract

We show how a venture capital firm’s fundraising is affected by its investment choices. We investigate three leading indicators that are calculated from the type of investments the venture capital firms make: style drift investments, follow-on investments, and investments in which the venture capital firm is not the lead investor in the portfolio company. We find that these investments are associated with lower fundraising. Investment type and fundraising reaction to investment type are both moderately stable through time. We also find evidence that information about investment types is more important for fundraising during bad states of the world.

Keywords: Private equity, signaling, style drift, follow-on investments, lead investor, performance indicator, venture capital, fundraising

JEL Classification: G11, G23, G24

Suggested Citation

Lahr, Henry and Trombley, Timothy E., Early Indicators of Fundraising Success by Venture Capital Firms (August 16, 2017). Available at SSRN: https://ssrn.com/abstract=3020256

Henry Lahr

The Open University - Business School ( email )

Milton Keynes, MK6 7AA
United Kingdom

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.cbr.cam.ac.uk

Timothy Trombley (Contact Author)

San Diego State University ( email )

San Diego, CA 92182-0763
United States

Paper statistics

Downloads
59
Rank
315,597
Abstract Views
224