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Assessing the Commercial Viability of New Ventures

Author

Listed:
  • Thomas B. Astebro

    (Department of Management Sciences - University of Waterloo [Waterloo])

Abstract

Only a small fraction of all start-ups receive venture capital (VC). That's because while VC firms argue that there are few high-quality start-ups to invest in, Canadian entrepreneurs claim that there is a lack of venture capital for start-ups. The VC industry cites a lack of reliable information as a reason to shy away from start-ups. So, to help with venture capital decision-making, I developed a statistical model that predicts the likelihood of a new venture successfully reaching the market. This model is based on data from over 500 new Canadian ventures and successfully predicts correct market outcomes in 83 per cent of the cases. It is significantly better at predicting the outcomes of new ventures than seasoned venture capitalists (VCs) whose predictions have an accuracy ranging between 17 and 40 per cent. This model can be used to screen venture capital applicants.

Suggested Citation

  • Thomas B. Astebro, 2003. "Assessing the Commercial Viability of New Ventures," Post-Print hal-00648000, HAL.
    • Handle: RePEc:hal:journl:hal-00648000
    as

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