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Start-up investment with scarce venture capital support

  • Kanniainen, Vesa
  • Keuschnigg, Christian

Venture capitalists, representing informed capital, screen, monitor and advise start-up entrepreneurs. The paper reports three new results on venture capital (VC) finance. First, there is an optimal number of companies in the VC portfolio with a trade-off between the number of companies and the value of managerial advice. Second, dilution of advice plays an important role in the adjustment of the VC industry. Third, as a welfare result, a VC tends to provide too little advisory effort but takes too many companies to be advised. Testable implications are discussed.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 28 (2004)
Issue (Month): 8 (August)
Pages: 1935-1959

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Handle: RePEc:eee:jbfina:v:28:y:2004:i:8:p:1935-1959
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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