The Driving Forces of Venture Capital Investments

Posted: 7 Oct 2018

See all articles by Yixi Ning

Yixi Ning

University of Houston - Victoria - School of Business Administration

Wei Wang

Zhejiang University

Bo Yu

Zhejiang University

Date Written: June 15, 2015

Abstract

We have examined the volatility and macroeconomic drivers of venture capital investments in the past 17 years from 1995 to 2011. We find that venture capital investments in the U.S. by the total amount, by the number of deals, and by the average amount per deal are significantly affected by macroeconomic factors and public market signals. The fundamental changes in economic situations (i.e. the 2000 high-tech bubble, the 2008 global financial crisis) had substantial impact on the U.S. venture capital industry. In response to these dramatic changes, venture firms adjust their risk preferences and investment strategies by securing fewer deals with a smaller average amount per deal in general, increasing their allocations to the expansion and later-stage investments, and injecting a lower percent of cash in the first several financing sequences as opposed to their total committed investments to a company. We also find the impact of 2008 global financial crisis and economic recession on the venture capital industry is somewhat different from that of the 2000 dot-com bubble.

Keywords: ]Venture Capital, Macroeconomic Factors, Public Market Signals, 2000 High-Tech bubble, 2008 Financial Crisis

Suggested Citation

Ning, Yixi and Wang, Wei and Yu, Bo, The Driving Forces of Venture Capital Investments (June 15, 2015). Small Business Economics, 2015, Available at SSRN: https://ssrn.com/abstract=3249669

Yixi Ning (Contact Author)

University of Houston - Victoria - School of Business Administration ( email )

2002 W Grand Pkwy
Katy, TX 77449
United States

Wei Wang

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

Bo Yu

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

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