O'Reilly logo

Venture Capital and Private Equity Contracting, 2nd Edition by Sofia A. Johan, Douglas J. Cumming

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

18

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 ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required