Essays in venture capital

This dissertation consists of three empirical essays, focusing on the distinct issues in venture capital firms’ fundraising and investment activity. In a broad perspective, the dissertation explores: what makes venture capitalists to remain on the market? How they deal with various agency problems associated with their investments? What determines the trade-off between distinct options via which venture capitalists realize their profits? The first essay examines the speed of fundraising and the trade-offs between raising different types of funds and relates them to the degree and the dimension of specialization of Venture Capital(VC) firms. It further derives implications of quick fundraising for venture capitalists and their investors. The second essay uncovers the phenomenon of investment syndication between funds run by the same VC firm. It provides evidence that such syndication is widespread among US VC backed deals and may be employed to mitigate agency problems between syndicate partners, on the one hand, and between entrepreneurs and venture capitalists, on the other hand. The third essay focuses on explaining the determinants of the exit process from VC investments. It shows that the VC investment outcome expressed by an IPO, trade sale or liquidation of a VC backed deal is significantly affected by the dynamics in VC funding, syndication and financial market conditions across investment duration.