38 Pages Posted: 4 Jan 2007
This paper is the first to introduce an analysis of the effect of different types of venture capitalist value-added activities (financial, administrative, marketing strategic/management) on fundraising. In addition, we include an analysis of the functional difference between committed funds and drawdowns from capital commitments vis-a-vis pension funds and venture capital funds. The new comprehensive data, collected by the Australian Bureau of Statistics for 1999-2001, enable controls for venture capitalist performance, risk, investment activity, and management and performance fees. The results indicate that significantly more capital is allocated to venture capitalists that provide financial and strategic/management expertise to entrepreneurial firms (as opposed to marketing and administrative expertise). In addition, fundraising is greater among funds with higher returns and performance fees and lower fixed management fees. In contrast, drawdowns from capital commitments are greater among venture capital funds that provide financial and marketing expertise to investees (as opposed to strategic and administrative expertise), and among funds with higher performance fees and fixed management fees. Further, the results indicate an adverse impact on venture capital fundraising from illiquidity attributable to a two-year lock-up period in IPO exits over the period considered.
Keywords: Venture Capital, Fundraising, Drawdowns, Value Added Activities, Returns, Compensation
JEL Classification: G24, G28, G31, G32, G35
Suggested Citation: Suggested Citation
Fleming, Grant and Cumming, Douglas J. and Suchard, Jo-Ann, Venture Capitalist Value-Added Activities, Fundraising and Drawdowns. Journal of Banking and Finance, Vol. 29, pp. 295-331, 2005 . Available at SSRN: https://ssrn.com/abstract=466962