Early indicators of fundraising success by venture capital firms

Lahr, Henry and Trombley, Timothy E. (2020). Early indicators of fundraising success by venture capital firms. Journal of Corporate Finance, 65, article no. 101672.

DOI: https://doi.org/10.1016/j.jcorpfin.2020.101672

Abstract

We show how a venture capital firm's fundraising is affected by its investment choices. We investigate three leading indicators that are calculated from the types of investments the venture capital firms make: style drift investments, follow-on investments, and investments in which the venture capital firm is not the lead investor in the portfolio company. We find that these investment characteristics are associated with lower fundraising. Characteristics and the reaction of fundraising to characteristics are both moderately stable through time. We also find some evidence that information about investment characteristics is more important for fundraising during bad states of the world and that ex-ante characteristics are related to eventual exit outcomes and financial performance.

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About

• Item ORO ID
• 72364
• Item Type
• Journal Item
• ISSN
• 0929-1199
• Keywords
• Private equity; Style drift; Follow-on investments; Lead investor; Performance indicator; Venture capital; Fundraising
• Academic Unit or School
• Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
  Faculty of Business and Law (FBL) > Business
  Faculty of Business and Law (FBL)
• Copyright Holders
• © 2020 Elsevier B.V.
• Depositing User
• Henry Lahr