First Faculty Advisor
Collins, M. Cary
Second Faculty Advisor
Venture; Capital; Private; Equity; start-up; investing; investment; funding; components;
This study explores the relationship between a venture capital firm’s geographic region and the investment traits that it values. This study’s results will help determine whether venture capital firms, by geographic region, emphasize certain investment traits over others when funding new companies.
The study examines three regions (the East Coast of the United States, the West Coast of the United States and China, specifically Beijing and Shanghai). By surveying available firms in each region, I collected data on which funding components, or investment traits, the sampled respondents valued. To increase the usefulness of my findings, I held constant the stage of funding for each surveyed firm. That is, when I compare firms across regions, I require that they have similar funding stages (e.g. seed stage or very early stage, start-up or early stage, late stage or pre-IPO stage, etc.).
In my research, I follow the MacMillan, Siegel and Narasimha (1985) model. That is, my investing traits, or funding components, include return on the investment (ROI), management team’s experience, defensible product, industry barriers to entry, current investment by entrepreneur, macroeconomic conditions, business plan analysis, current portfolio risks, etc. Once the data from the various firms from the West Coast, East Coast and China were compiled, I then determine the top ten funding components for each region from those surveys. I then statistically examined whether there were any significant geographical differences among the top ten funding components of the venture capital firms in each region.