Venture Capitalists' Evaluations of Start-Up Teams: Trade-Offs, Knock-Out Criteria, and the Impact of VC Experience

32 Pages Posted: 13 Feb 2007

See all articles by Nikolaus Franke

Nikolaus Franke

Vienna University of Economics and Business

Marc Gruber

Ecole Polytechnique Federale de Lausanne - MTEI

Dietmar Harhoff

Max Planck Institute for Innovation and Competition; Ludwig-Maximilians-Universität München; Centre for Economic Policy Research (CEPR)

Joachim Henkel

TUM School of Management - Technical University of Munich (TUM)

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Abstract

The start-up team plays a key role in venture capitalists' evaluations of venture proposals. Our findings go beyond existing research, first by providing a detailed exploration of VCs' team evaluation criteria, and second by investigating the moderator variable of VC experience. Our results reveal utility trade-offs between team characteristics and thus provide answers to questions such as "What strength does it take to compensate for a weakness in characteristic A?" Moreover, our analysis reveals that novice VCs tend to focus on the qualifications of individual team members, while experienced VCs focus more on team cohesion. Data was obtained in a conjoint experiment with 51 professionals in VC firms and analyzed using discrete choice econometric models.

Keywords: venture teams, conjoint analysis, team characteristics

JEL Classification: M13, G24, D23

Suggested Citation

Franke, Nikolaus and Gruber, Marc and Harhoff, Dietmar and Henkel, Joachim, Venture Capitalists' Evaluations of Start-Up Teams: Trade-Offs, Knock-Out Criteria, and the Impact of VC Experience. Entrepreneurship Theory and Practice, Forthcoming, Available at SSRN: https://ssrn.com/abstract=944239

Nikolaus Franke

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria
011-43-1-31336-0 (Phone)

Marc Gruber

Ecole Polytechnique Federale de Lausanne - MTEI ( email )

Odyssea
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Lausanne, 1015
Switzerland

Dietmar Harhoff

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany
+49 89 24246 550 (Phone)
+49 89 24246 599 (Fax)

HOME PAGE: http://www.ip.mpg.de

Ludwig-Maximilians-Universität München ( email )

Munich, 80539
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Joachim Henkel (Contact Author)

TUM School of Management - Technical University of Munich (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

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