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21-02-2024 | Regular Article

Diversification and size in venture capital investing

Authors: Emanuele Teti, Alberto Dell’Acqua, Ada Bovsunovsky

Published in: Eurasian Business Review

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Abstract

We empirically examine the interaction between different types of diversification (stage, industry, geography) and portfolio size, i.e., number of investee companies, in explaining venture capital (VC) funds’ returns. We study a comprehensive dataset of 422 liquidated US VC funds to conduct multiple analyses in a large timeframe. The results show that large portfolio size and diversification in a limited number of industries contribute positively to fund performance, while stage and geographical diversification have no significant relationship with returns. Our findings can support both the practice of VC portfolio management in reaching better capital allocation efficiency and policymakers in providing guidance for VC fund development programmes backed by sovereign and international institutions.

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Metadata
Title
Diversification and size in venture capital investing
Authors
Emanuele Teti
Alberto Dell’Acqua
Ada Bovsunovsky
Publication date
21-02-2024
Publisher
Springer International Publishing
Published in
Eurasian Business Review
Print ISSN: 1309-4297
Electronic ISSN: 2147-4281
DOI
https://doi.org/10.1007/s40821-024-00258-7