The Equilibrium Size and Value-Added of Venture Capital

• 成果类型: Article
• 署名作者: Sannino, Francesco
• 署名单位: Frankfurt School Finance & Management
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13313
• 发表日期: 2024
• 页码: 1297-1352
• 关键词: convertible securities; performance; returns; search; investments; persistence; CONTRACTS; creation; MODEL

摘要

I model positive sorting of entrepreneurs across the high and low value-added segments of the venture capital market. Aiming to attract high-quality entrepreneurs, inefficiently many venture capitalists (VCs) commit to provide high value-added by forming small portfolios. This draws the marginal entrepreneur away from the low value-added segment, reducing match quality in the high value-added segment too. There is underinvestment. Multiple equilibria may emerge, and they differ in aggregate investment. The model rationalizes evidence on VC returns and value-added along fundraising waves and when the cost of entrepreneurship falls, and generates untested predictions on the size and value-added of venture capital.