Investment behaviour and decision criteria of venture capital investors

In recent years, venture capital has established itself as one of the most important forms of financing for young, growth-orientated companies. Both the volume of financing and the number of financing enquiries have risen sharply since the mid-1990s. Venture capital investors have responded to this development by shortening the investment assessment process and applying strict selection criteria.

In recent years, academics and practitioners have attempted to map this, in some cases highly individualised, assessment process and to extract investors' decision-making criteria. Some (general) studies have aimed to derive generally valid decision criteria by equating all venture capital investments, while other publications have focussed on individual sub-areas. Due to the peculiarities of the selected designs, either the criteria perceived as important by the investors or the criteria hidden in the actual decision-making process were analysed.

Task of the diploma thesis:

Within the scope of the Diplom thesis, the essential decision criteria of venture capital investors are to be worked out on the basis of the existing literature. It is to be examined whether these criteria are applicable to all investment situations or whether a situation-dependent variance exists. This would then have to be operationalised in the final result. In the thesis, both theoretical backgrounds and empirical results are to be discussed.

Examples for the introduction to the literature:

• Bachher, J.S. (2000). Venture capitalists' investment criteria in technology-based new ventures. Dissertation, <st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Waterloo</st1:placename>, <st1:place w:st="on"><st1:city w:st="on">Waterloo</st1:city>, <st1:state w:st="on">Ontario</st1:state>, <st1:country-region w:st="on">Canada</st1:country-region></st1:place>.
• Hall, J. & Hofer, C.W. (1993). Venture capitalists' decision criteria in new venture evaluation. Journal of Business Venturing, 8, 25-42.
• Muzyka, D., Birley, S., & Leleux, B. (1996). Trade-offs in the investment decisions of European venture capitalists. Journal of Business Venturing, 11, 273-287.
• Shepherd, D.A. (1999). Venture capitalists' introspection: A comparison of "in use" and "espoused" decision policies. Journal of Small Business Management, 37(2), 76-87.
• Zacharakis, A.L. & Meyer, G.D. (1998). A lack of insight: Do venture capitalists really understand their own decision process? Journal of Business Venturing, 13, 57-76.

Contact person:

Dipl.-Kfm. Michael Schuricht

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