Capital Decision

” (Kinnunen, 2004) the work of Kaplan and Schroar (2003) states findings that the past performance is highly relative to capitals flows to private equity funds.

The work of Mishra, Kemmerer, and Shenoy entitled: “Managing Venture Capital Investment Decisions: A Knowledge-Based Approach” relates the building of a causal map of the investment decision through use of interviewing venture capitalists and then converting this information into a “causal Bayes net” which are stated to be “especially suited for domains characterized by a high degree of uncertainty.” (Mishra, Kemmerer, and Shenoy, 2001) This technique has also been utilized in developing artificial intelligence and even used “in medical diagnosis, modeling portfolio risk and return, and new product development…” And are based on “probability theory.” (Mishra, Kemmerer, and Shenoy, 2001) This method is reported to be one that increases the likelihood of gaining an understanding of the decision-making process of Venture Capitalists (VCs) and that has the capacity to lead to “more effective and efficient allocation of capital to the available projects.” (Mishra, Kemmerer, and Shenoy, 2001)

The following figure shows the raw causal mapping designed by Mishra, Kemmerer and Shenoy (2001).

Raw Causal Map of a VCs Decision Model

Source: Mishra, Kemmerer and Shenoy (2001)

It is clear from the factors listed in the above causal mapping that there are many and diverse factors that affect decision-making of the Venture Capitalist (VC) and it is precisely these varied factors affecting the VC decision-making process that the following study intends to explore.

Bibliography

Kaplan, S. & Schroar, a. 2003. Private Equity Performance: Returns, Persistence and Capital Flows. MIT Sloan Working Paper No. 4446-03; AFA 2004 San Diego Meetings.

Cochrane, John H. The Risk and Return of Venture Capital. Working paper, University of Chicago, 2001.

Kinnunen, Harri (2004) Institutional Investors Decision Making Criteria for Investing in Venture Capital Funds. Frontiers of E-Business Research 2004. Online available at http://www.ebrc.info/kuvat/695-709_04.pdf

Patel, Pankaj and DSouza, Rodney (2008) Uncovering Knowledge Structures of Venture Capital Investment Decision Making. A Working Paper for SBA Office of Advocacy. Jan 2008. Online available at http://www.sba.gov/advo/research/rs315tot.pdf

Mishra, Sanjay, Kemmerer, Benedict,.

cadd

leave a Comment