There were, however, major regional differences in investment stages of interest. There were no differences between geographic regions in the proportion of investments where the venture capital firm served as lead investor. Even though they invested over half their funds in late-stage investments whereas smaller firms focused on the earlier stages, the large firms were still a major source of early stage financing. Large firms also made larger individual investments. The large firms provided the least, and the medium-sized firms the most, assistance to portfolio companies. The larger firms had more professionals and managed more money per professional. Average fund size varied from 278 to 12 million dollars. Not surprisingly, high involvement VCs viewed their activities as more important.īased upon the amount of capital they managed, firms were also split into three groups. There were major differences in the importance the VCs attached to their post-investment activities. Notable portfolio companies include Alnylam, BIND. The difference in assistance provided was not strongly tied to differences in investment stage of interest. The firm looks mainly for early-stage investment opportunities and focuses on platform technologies. The most active group averaged over 35 hours per month per investment, and the least active group averaged less than seven hours. Firms were split into three groups based upon the amount of time the VC spent with a portfolio company after an investment was made as lead investor. There were, however, differences in the significance that VCs attached to particular post-investment activities. However, after the investment was made, there was little difference in the amount of time spent assisting the portfolio company. Late-stage investors spent more time evaluating a potential investment.
Earlier stage investors sought ventures with higher potential returns-a 42% hurdle rate of return for the earliest stage investor versus 33% for the late-stage investor. However, after the investment was made, earlier stage investors attached more importance to spending their time evaluating and recruiting managers. There were no differences by stage regarding the desired qualities of management. Late-stage investors were more interested in demonstrated market acceptance. The earlier the investment stage, the greater the interest in potential investments built upon proprietary products, product uniqueness, and high growth markets. Through a questionnaire, 149 venture capitalists provided data about their firms, about what they look for in evaluating an investment, and about how they work with a portfolio company following an investment.įirms were divided into four groups based on venture stage of interest. Four potential sources of differences between venture capital (VC) firms were examined-venture stage of interest, amount of assistance provided by the VC, VC firm size, and geographic region where located.
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