Fund Size
This chapter examines the effect of fund size on investee firm valuations in the venture capital market. We show a convex (U-shape) relationship between fund size and firm valuations. We further document firm valuations are positively correlated to measures of limited attention. In addition, we show a concave (inverse U-shape) relationship between fund size and venture’s performance measured as the probability of successful exits. Further, this relation is particularly strong when the premoney valuation of the investment is high. Our findings hold across a wide range of robustness checks, including but not limited to sample selection and correction for unobserved company-level value drivers. Our findings support the notion that there ...
Get Venture Capital and Private Equity Contracting, 2nd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
