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Toward the standardization of venture capital investment evaluation : decision criteria for rating investee business plans

Mainprize, Brent, Hindle, Kevin and Mitchell, Ron 2002, Toward the standardization of venture capital investment evaluation : decision criteria for rating investee business plans, in Proceedings of the 22rd Frontiers of Entrepreneurship Research conference, Babson College, Babson Park, Mass., pp. 1-16.

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Title Toward the standardization of venture capital investment evaluation : decision criteria for rating investee business plans
Author(s) Mainprize, Brent
Hindle, Kevin
Mitchell, Ron
Conference name Frontiers of Entrepreneurship Research. Conference (22rd : 2002 : Babson Park, Mass.)
Conference location Babson Park, Mass.
Conference dates 2002
Title of proceedings Proceedings of the 22rd Frontiers of Entrepreneurship Research conference
Publication date 2002
Start page 1
End page 16
Publisher Babson College
Place of publication Babson Park, Mass.
Summary This study examined the criteria used by venture capitalists to evaluate business plans in order to make investment decisions. A literature survey revealed two competing theories: “espoused criteria” where evaluation decisions are based on what venture capitalists say are the decisive factors; versus the use of “known attributes” that successful ventures actually possess. Brunswik’s Lens Model from Social Judgment Theory guided an empirical investigation of several different evaluation methods based on information contained in 129 business plans submitted for venture capital over a 3 year period. Data evaluation culminated in the comparison of the percentage of correct decisions (“hit-rate”) for each method. We found that decisions based on the known attributes of successful ventures have significantly better hit-rates than decisions made using espoused criteria. Discussion centred on the goal of achieving consistency in the conduct of venture analysis. Process standardization can aid in the achievement of consistency. Future research will both deepen and broaden insights.
Notes Reproduced with kind permission of the copyright owner.
Language eng
Field of Research 150399 Business and Management not elsewhere classified
Socio Economic Objective 910499 Management and Productivity not elsewhere classified
HERDC Research category E1.1 Full written paper - refereed
Copyright notice ©2002, The authors
Persistent URL http://hdl.handle.net/10536/DRO/DU:30029681

Document type: Conference Paper
Collections: School of Management and Marketing
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