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Venture Capital, Private Firms, and the Capital Acquisition Process

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  • Rick H. Mull

    (Fort Lewis College)

Abstract

This paper presents an empirical examination of the incentives motivating venture capitalists and sample of growth option intensive private firms with acute capital requirements to interact, the gains each group achieves through this association, the types of private firms successfully attracting venture capital, and mechanisms used in this funding process. Results show that venture capital backed firms achieve growth rates (1) greater than expected, and (2) greater than a matched sample of non-venture capital backed firms. This paper also finds that low collateral asset values, low profitability, and younger firm age to be significant determinants in which firms obtain venture capital funding. Finally, this paper shows that the use of the convertible preferred stock to be positively related to increasing firm risk, and that venture capital backed firms use convertible preferred stock more frequently than do non-venture capital backed firms.

Suggested Citation

  • Rick H. Mull, 1994. "Venture Capital, Private Firms, and the Capital Acquisition Process," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 3(3), pages 229-248, Fall.
    • Handle: RePEc:pep:journl:v:3:y:1994:i:3:p:229-248
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    Cited by:

    1. Lowell W. Busenitz & James O. Fiet, 1996. "The Effects of Early Stage Venture Capitalist Actions on Eventual Venture Disposition," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 5(2), pages 97-114, Summer.
    2. James O. Fiet, 1997. "Fragmentation in the Market for Venture Capital," Entrepreneurship Theory and Practice, , vol. 21(2), pages 5-20, January.
    3. Arturo Haro-de-Rosario & María del Carmen Caba-Pérez & Leonardo Cazorla-Papis, 2016. "The impact of venture capital on investee companies: evidence from Spain," Review of Managerial Science, Springer, vol. 10(3), pages 577-600, July.
    4. Elisabete Félix & José Paulo Esperança & Mohamed Azzim Gulamhussen & Cesaltina Pires, 2009. "Uma Análise do Mercado de Capital de Risco Português: Saídas Parciais Versus Saídas Totais," CEFAGE-UE Working Papers 2009_05, University of Evora, CEFAGE-UE (Portugal).
    5. Elisabete Gomes Santana Félix & José Paulo Esperança & Mohamed Azzim Gulamhussen & Cesaltina Pacheco Pires, 2009. "An analysis of the Portuguese venture capital market: partial exits versus total exits," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(3), pages 239-258.

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    More about this item

    Keywords

    Capital ; Private Firm ; Venture Capital; Capital Acquisition;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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