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The Optimal Portfolio of Start-Up Firms in Venture Capital Finance

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Author Info
Vesa Kanniainen ()
Christian Keuschnigg ()

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Abstract

A venture capitalist faces a trade-off between the extent of managerial advice allocated to each start-up and the total number of firms advised. Diminishing returns to advice per firm call for a larger portfolio. As advice gets diluted, further expansion of the portfolio eventually becomes unprofitable.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 381.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_381

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Related research
Keywords: Venture capital finance double-sided moral hazard company portfolio

Other versions of this item:

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Norton, Edgar & Tenenbaum, Bernard H., 1993. "Specialization versus diversification as a venture capital investment strategy," Journal of Business Venturing, Elsevier, vol. 8(5), pages 431-442, September. [Downloadable!] (restricted)
  2. Gavin C Reid & Nicholas G Terry & Julia A Smith, 1995. "Risk Management in Venture Capital Investor-Investee Relations," CRIEFF Discussion Papers 9505, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
    Other versions:
  3. Gorman, Michael & Sahlman, William A., 1989. "What do venture capitalists do?," Journal of Business Venturing, Elsevier, vol. 4(4), pages 231-248, July. [Downloadable!] (restricted)
  4. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October. [Downloadable!] (restricted)
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This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
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This page was last updated on 2008-7-30.

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