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Factors influencing venture capitalists' project financing decisions in South Africa

  • Van Deventer, Bart
  • Mlambo, Chipo

This study explores and identifies the investment criteria used by South African venture capitalists in their venture screening and evaluation processes. Using a Likert scale type of questionnaire, South African venture capitalists (VCs)were asked to rate the investment criteria identified in similar studies abroad and to report any additional criteria of their own. By evaluating the mean ratings, it was found that South African VCs consider the entrepreneur’s honesty and integrity; a good expected market acceptance; and a high internal rate of return (IRR), to be the three most important criteria. The South African VCs, just like their overseas counterparts, regard management considerations to be the most important criteria group in the evaluation of new investment projects. The results of this study are deemed useful to both venture capitalists in their decision-making process and to entrepreneurs in their venture capital applications to maximise their success rate.

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File URL: http://mpra.ub.uni-muenchen.de/24970/1/MPRA_paper_24970.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24970.

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Date of creation: 31 Aug 2008
Date of revision: 28 Feb 2009
Publication status: Published in South African Journal of Business Management 1.40(2009): pp. 33-41
Handle: RePEc:pra:mprapa:24970
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Web page: http://mpra.ub.uni-muenchen.de

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  1. Mike Wright, 1998. "Venture Capital and Private Equity: A Review and Synthesis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 521-570.
  2. Macmillan, Ian C. & Zemann, Lauriann & Subbanarasimha, P. N., 1987. "Criteria distinguishing successful from unsuccessful ventures in the venture screening process," Journal of Business Venturing, Elsevier, vol. 2(2), pages 123-137.
  3. Christopher B. Barry, 1994. "New Directions in Research on Venture Capital Finance," Financial Management, Financial Management Association, vol. 23(3), Fall.
  4. Dean A. Shepherd, 1999. "Venture Capitalists' Assessment of New Venture Survival," Management Science, INFORMS, vol. 45(5), pages 621-632, May.
  5. Ge, Dingkun & Mahoney, James M. & Mahoney, Joseph T., 2005. "New Venture Valuation by Venture Capitalists: An Integrative Approach," Working Papers 05-0124, University of Illinois at Urbana-Champaign, College of Business.
  6. Chan, Yuk-Shee & Siegel, Daniel R & Thakor, Anjan V, 1990. "Learning, Corporate Control and Performance Requirements in Venture Capital Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 365-81, May.
  7. Dixon, R, 1991. "Venture capitalists and the appraisal of investments," Omega, Elsevier, vol. 19(5), pages 333-344.
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