Investor Value-Added

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Investor Value-Added. Cumming and Johan (2013 Chapter 14). 1. Chapter Objectives. Overview chapter for Part IV on Investor Effort Summarize topics covered in Chapters 15-18 and related research. 2. Issues in this Chapter. - PowerPoint PPT Presentation

Transcript of Investor Value-Added

  • Pre-Money Valuations and Venture Characteristics

  • Pre-Money Valuation and Market Conditions

  • Pre-Money Valuation and Fund Characteristics

  • Fund Size and Portfolio Size

  • Fund Size and Portfolio Diversity

    Cumming & Johan (2013)Venture Capital Investing

    Investment DurationLength of VC investment suggestive of how much effort and certification provided by the investorMegginson and Weiss (1991 Journal of Finance) Venture Capitalist Certification in Initial Public OfferingsFind longer VC investment duration implies less IPO underpricing

    More in Chapter 20: Duration depends on benefits and costs of maintaining the investment in the portfolio*

    Cumming & Johan (2013)Venture Capital Investing

    Conclusion / SummaryVC and PE funds get significant cash flow and control rights (Chapters 10-13)Important that they provide not just money, but also something more in terms of value-addedEvidence on causality in value-added is mixed, as reviewed in this chapter

    Proxies for value-added includeAdvice, Monitoring, Conflict (Chapter 15)Location (Chapter 16)Portfolio Size (Chapter 17)Fund Size (Chapter 18)

    Duration (Chapter 20) also proxies effort, and of course directly tied to exits, the subject of Chapters 19-22*