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

Author

Listed:
  • Vesa Kanniainen
  • Christian Keuschnigg

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.

Suggested Citation

  • Vesa Kanniainen & Christian Keuschnigg, 2000. "The Optimal Portfolio of Start-Up Firms in Venture Capital Finance," CESifo Working Paper Series 381, CESifo.
  • Handle: RePEc:ces:ceswps:_381
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp381.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Venture capital finance; double-sided moral hazard; company portfolio;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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