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Diversification and size in venture capital investing

Author

Listed:
  • Emanuele Teti

    (Università di Pisa)

  • Alberto Dell’Acqua

    (Bocconi University and SDA Bocconi)

  • Ada Bovsunovsky

    (Bocconi University)

Abstract

We empirically examine the interaction between different types of diversification (stage, industry, geography) and portfolio size, i.e., number of investee companies, in explaining venture capital (VC) funds’ returns. We study a comprehensive dataset of 422 liquidated US VC funds to conduct multiple analyses in a large timeframe. The results show that large portfolio size and diversification in a limited number of industries contribute positively to fund performance, while stage and geographical diversification have no significant relationship with returns. Our findings can support both the practice of VC portfolio management in reaching better capital allocation efficiency and policymakers in providing guidance for VC fund development programmes backed by sovereign and international institutions.

Suggested Citation

  • Emanuele Teti & Alberto Dell’Acqua & Ada Bovsunovsky, 2024. "Diversification and size in venture capital investing," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 14(2), pages 475-500, June.
    • Handle: RePEc:spr:eurasi:v:14:y:2024:i:2:d:10.1007_s40821-024-00258-7
    DOI: 10.1007/s40821-024-00258-7
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    More about this item

    Keywords

    Diversification; Size; Venture capital performance;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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