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The Effects of Early Stage Venture Capitalist Actions on Eventual Venture Disposition

Author

Listed:
  • Lowell W. Busenitz

    (University of Houston)

  • James O. Fiet

    (University the Pacific)

Abstract

This study examines the relationship between venture capitalist actions and the eventual disposition of a venture through an IPO, which is the most profitable exit strategy. The actions included in this study were ( 1) altering the amount of their investment; ( 2) securing a concentrated equity position; ( 3) diversifying their syndicate investments; and ( 4) introducing their investees to other sources of financing. After five years, this study found a positive relationship between IPO exit and ( 1) the amount of their investment; and ( 2) the diversification of their VC syndicate. However, it found only mixed results for ( 1) venture capitalist concentrated equity position; and ( 2) introductions to other sources of funding. Finally, implications for future research are discussed.

Suggested Citation

  • Lowell W. Busenitz & James O. Fiet, 1996. "The Effects of Early Stage Venture Capitalist Actions on Eventual Venture Disposition," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 5(2), pages 97-114, Summer.
    • Handle: RePEc:pep:journl:v:5:y:1996:i:2:p:97-114
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    References listed on IDEAS

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    More about this item

    Keywords

    Early-Stage Ventures; Startup; Valuation; Exit; Disposition;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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