The Size of Venture Capital and Private Equity Fund Portfolios

55 Pages Posted: 22 Nov 2006 Last revised: 12 Nov 2013

See all articles by Gennaro (帅纳) Bernile

Gennaro (帅纳) Bernile

University of Miami - Department of Finance

Douglas J. Cumming

Florida Atlantic University

Evgeny Lyandres

Boston University

Date Written: 2007

Abstract

We propose a model that examines the optimal size of venture capital and private equity fund portfolios. The relationship between a VC and entrepreneurs is characterized by double-sided moral hazard, which causes the VC to trade off larger portfolios against lower values of portfolio companies. We analyze the structural relations between the VC's optimal portfolio structure and entrepreneurs' and VC's productivities, their disutilities of effort, the value of a successful project, and the required initial investment in a venture. We also test the model's predictions using a small proprietary dataset collected through a survey targeted to VC and private equity funds worldwide.

Suggested Citation

Bernile, Gennaro (帅纳) and Cumming, Douglas J. and Lyandres, Evgeny, The Size of Venture Capital and Private Equity Fund Portfolios (2007). Journal of Corporate Finance, Vol. 13, pp. 564-590, 2007, Available at SSRN: https://ssrn.com/abstract=946671

Gennaro (帅纳) Bernile

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Evgeny Lyandres (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-3582279 (Phone)

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