Determinants of the incidence and scale of seed capital investments by venture capital firms

Dimo Dimov, Gordon Murray

Research output: Contribution to journalArticlepeer-review

35 Citations (Scopus)

Abstract

Employing both behavioral decision making and agency theories, our study seeks to identify those factors that influence a venture capital (VC) firm's decision to undertake seed capital investments and, subsequently, the scale of such activity. Using data on the investments made by 2949 VC funds raised worldwide between 1962 and 2002, we find investor age, timing of investment, and fund location to be of importance. In addition, the size of the fund and the existing number of portfolio firms exert opposite influences on the level of seed capital activity of the VC firm. These results suggest that seed activity is a valuable source of market intelligence for leading VC firms seeking proactively to identify and invest in novel technologies.
Original languageEnglish
Pages (from-to)127-152
Number of pages26
JournalSmall Business Economics
Volume30
Issue number2
DOIs
Publication statusPublished - 1 Feb 2008

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