Do Venture Capitalists' Characteristics Affect the Performance of the Firms They Back?

24 Pages Posted: 24 Feb 2006

See all articles by José Martí

José Martí

Universidad Complutense de Madrid - Department of Accounting and Finance

Luisa Alemany

London Business School

Date Written: February 2006

Abstract

Previous research has already addressed the issue of the impact of venture capital (VC) backing on the growth patterns of investee firms. Based on qualitative, hand-collected data, other studies analyzed the different tasks performed by venture capitalists (VCs) to add value to their portfolio companies. The aim of this paper is to provide evidence of the effect of some VCs' characteristics on the performance of the portfolio firms over time. The findings are based on panel data of quantitative variables on a highly representative sample of VC investments in Continental Europe. This approach allows us to keep track of the changes over time and to control for the effect of the money invested and the value added by VCs separately. Our findings show that value added is significant in companies at the expansion stage for some VCs characteristics, such as age, size or number of portfolio companies per investment manager, whereas performance on start-up companies seems related to funding alone.

Keywords: Venture Capital, Entrepreneurial Finance, Performance, Value Added, Venture Capitalists

JEL Classification: G24, M13, O31

Suggested Citation

Martí Pellón, José and Alemany, Luisa, Do Venture Capitalists' Characteristics Affect the Performance of the Firms They Back? (February 2006). Available at SSRN: https://ssrn.com/abstract=886546 or http://dx.doi.org/10.2139/ssrn.886546

José Martí Pellón

Universidad Complutense de Madrid - Department of Accounting and Finance ( email )

Carretera de Humera s/n
Madrid 28223, Madrid 28223
Spain
+ 3491 3942310 (Phone)
+ 34 91 3942534 (Fax)

Luisa Alemany (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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