Broadening versus reinforcing investor portfolios: Social structure and the search for venture capital investors

This paper highlights the venture capital investor (VC) portfolios of startups, and explores how the portfolios evolve. We emphasize the important trade-off between broadening and reinforcing VC portfolios (i.e., expanding to new VCs versus relying on existing VCs). This is because, to startups, new and existing VCs generate very different opportunities and constraints. Focusing on the social structure of existing VCs, we argue that startups are more likely to opt for new VCs when the internal networks of existing VCs are denser, when the external networks of existing VCs are smaller, and when the status of existing VCs is lower. Additionally, we not only focus on whether new VCs are on board, but also pay attention to which new VCs are introduced, by analyzing the ex-ante embeddedness between existing and newly-introduced VCs. We stress that when new VCs are highly embedded with existing VCs, their involvement makes only a limited contribution to broadening a startup's portfolio and network. We test the hypotheses using a sample of VC financing rounds in the U.S. and find broad support.     

风投介入、风投声誉与创业板公司的成长性

本文以2010年12月31日前在深交所创业板上市的153家公司为研究样本,重点考察风险投资介入与风险投资声誉对创业板公司成长性的影响。研究发现:(1)风投背景公司的短期成长性显著高于无风投背景公司,而两类公司的长期成长性无显著差异,表明风投的介入,主要促进了创业板公司的短期成长性;(2)风投参与度的高低,对创业板公司的短期成长性和长期成长性均不构成显著影响,提高风投的参与度,并不能提升创业板公司的成长性;(3)高声誉风投支持公司的短期成长性显著高于低声誉风投支持公司,而两类公司的长期成长性无显著差异,表明风投声誉只对创业板公司的短期成长性起到促进作用。本文的结果表明,我国风险投资片面重视创业板公司的短期成长性,而对其长期成长性缺乏关注和推动。     

VC political connections and IPO earnings management

We examine the effect of VC political connections on accrual and real earnings management (EM) of IPOs controlled by private entrepreneurs in China. We find IPOs backed by government-controlled VCs exhibit severe IPO-year EM, which is driven by those VCs exiting their investments immediately after the VC lock-up expiration. In contrast, IPOs with politically connected private VCs have lower IPO-year EM and are not associated with VC exits. Therefore, IPOs with government-controlled VCs who immediately exit their investments are most likely to engage in ‘window-dressing’ of financial performance, and to have poorer long-run stock performance. The results remain unchanged after a battery of robustness tests.     

Social capital of venture capitalists and start-up funding

How does the social capital of venture capitalists (VCs) affect the funding of start-ups? By building on the rich social capital literature, we hypothesize a positive effect of VCs?? social capital, derived from past syndication, on the amount of money that start-ups receive. Specifically, we argue that both structural and relational aspects of VCs?? social networks provide VCs with superior access to information about current investment objects and opportunities to leverage them in the future, increasing their willingness to invest in these firms. Our empirical results, derived from a novel dataset containing more than 1,500 first funding rounds in the Internet and IT sector, strongly confirm our hypotheses. We discuss the implications of our findings for theories of venture capital and entrepreneurship, showing that the role and effect of VCs?? social capital on start-up firms may be more complex than previously argued in the literature.     

When do venture capitalists collaborate? Evidence on the driving forces of venture capital syndication

Using a sample of 2,373 unique capital contributions from 437 venture capitalists (VCs) over subsequent rounds into 961 start-ups during the period 1995–2005 in Germany we disentangle the circumstances under which lead VCs engage in syndicate relationships with partner VCs. The results indicate that syndication is more pronounced when VCs face higher risks that need to be diversified and capital burdens are larger. Moreover, we document that industry investment experience lends legitimacy to lead VCs, allowing them to enter syndicate relationships to enhance their network positions. In general, greater industry experience is associated with more syndication. Lastly, the results show that lead VCs involve new/additional partners in subsequent financing rounds to leverage their idiosyncratic skills and knowledge to improve deal selection and/or provide a better quality of managerial advice.     

The nature of information and overconfidence on venture capitalists' decision making

Venture capitalists (VCs) are considered experts in identifying high potential new ventures—gazelles. Thus, the VC decision process has received tremendous attention within the entrepreneurship literature. Yet, most studies on VC decision-making focus on which decision criteria are central to selecting gazelles. Although informative, the majority of these studies has neglected cognitive differences in how VCs make decisions. This is surprising considering the influence cognitive differences are likely to have on the exploitation of an opportunity as well as its influence on likely success. The current study investigates whether VCs are overconfident, as well as the factors surrounding the decision that lead to overconfidence.Overconfidence describes the tendency to overestimate the likely occurrence of a set of events. Overconfident people make probability judgments that are more extreme than they should, given the evidence and their knowledge. In the case of the new venture investment decision, overconfident VCs may overestimate the likelihood that a funded company will succeed.The results of the current study indicate that VCs are indeed overconfident (96% of the 51 participating VCs exhibited significant overconfidence) and that overconfidence negatively affects VC decision accuracy (the correlation between overconfidence and accuracy was 0.70). The level of overconfidence depended upon the amount of information, the type of information, and whether the VC strongly believes the venture will succeed or fail.As more information becomes available, people tend to believe they will make better decisions; they are making a “more informed decision.” More information ideally should enable the VCs to assess any potential pitfalls. However, additional information makes the decision more complex. Information factors may contradict and relate to other information in unexpected ways. Even if more information is available, people usually don't analyze all of it (even though they believe they do). Thus, more information creates greater confidence, but it also leads to lower decision accuracy.The type of information that is available also impacts overconfidence and decision accuracy. VCs are intuitive decision makers. When people are familiar with a decision and the structure of the information surrounding that decision, they resort to automatic information processing. On the other hand, if information surrounding the decision is structured in an unfamiliar way, people need to decipher what each piece of information means and how that impacts their overall accuracy. In the case of expert VCs, that means they must deviate from their intuitive style. It seems that forcing them outside their “comfort zone” has a negative effect on their confidence and has an even greater effect (negative) on their accuracy.There is evidence of an “availability bias” in VC decision-making; VCs rely on how well the current decision matches past successful or failed investments. VCs are overconfident in their prediction of venture success when they predict a very high level of success. VCs are also overconfident in their prediction of venture failure when they predict a very low likelihood of success. This high level of overconfidence in success predictions (or failure predictions) may encourage the VC to limit information search and fund a lower potential investment (or prematurely reject a stronger potential investment).Although overconfidence in itself does not necessarily lead to a wrong decision, the bias is likely to inhibit learning and improving the decision process. Overconfident VCs may not fully consider all relevant information, nor search for additional information to improve their decision. Moreover, the natural tendency for people to recall past successes rather than failures may mean that VCs will make the same mistakes again. VCs can take simple steps to reduce the effect of overconfidence, including counterfactual thinking (i.e., imaging scenarios where current assumptions might not hold), formally recording how past decisions were made at the time of the decision (versus trying to recall how that decision was made from memory), and using actuarial decision aids that decompose decisions into core components. Reducing overconfidence may lead to stronger decisions. It is hoped that this study illustrates the power of cognitive theories for understanding VC decision-making.     

Venture capitalist governance and value added in four countries

The rapid internationalization of markets for venture capital is expanding the funding alternatives available to entrepreneurs. For venture capital firms, this trend spells intensified competition in markets already at or past saturation. At issue for both entrepreneurs and venture capital firms is how and when venture capitalists (VCs) can provide meaningful oversight and add value to their portfolio companies beyond the provision of capital. An important way VCs add value beyond the money they provide is through their close relationships with the managers of their portfolio companies. Whereas some VCs take a very hands-off approach to oversight, others become deeply involved in the development of their portfolio companies.Utilizing surveys of VCs in the United States and the three largest markets in Europe (the United Kingdom, the Netherlands, and France), we examined the determinants of interaction between VCs and CEOs, the roles VCs assume, and VCs' perceptions of how much value they add through these roles. We examined the strategic, interpersonal, and networking roles through which VCs are involved in their portfolio companies, and we analyzed how successful such efforts were. By so doing we were able to shed light on how and when VCs in four major markets expend their greatest effort to provide oversight and value-added assistance to their investment companies.Consistent with prior empirical work, we found that VCs saw strategic involvement as their most important role, i.e., providing financial and business advice and functioning as a sounding board. They rated their interpersonal roles (as mentor and confidant to CEOs) as next in value.Finally, they rated their networking roles (i.e., as contacts to other firms and professionals) as third most important. These ratings were consistent across all four markets. VCs in the United States and the United Kingdom were the most involved in their ventures, and they added the most value. VCs in France were the least involved and added the least value; VCs in France appeared to be least like others in terms of what factors drove their efforts. Our theoretical models explained a greater proportion of variance in governance and value added in the United States than elsewhere. Clear patterns of behavior emerged that reflect the manner in which different markets operate. Among the European markets, practices in the United Kingdom appear to be most like that in the United States.Determinants of Governance (Face-to-Face Interaction)We operationalized VC governance or monitoring of ventures as the amount of face-to-face interaction VCs had with venture CEOs. We found some evidence that VCs increase monitoring in response to agency risks, but the results were mixed. Lack of experience on the part of CEOs did not prompt significant additional monitoring as had been predicted. A more potent determinant was how long the VC-CEO pairs worked together; longer relationships mitigated agency concerns and reduced monitoring. Contrary to expectations, perceived business risk in the form of VCs' satisfaction with recent venture performance had little impact on face-to-face interaction. Monitoring was greatest in early stage ventures, indicating that VCs respond to high uncertainty by increased information exchange with CEOs. We measured two types of VC experience and found different patterns for the two. Generally speaking, VCs with greater experience in the venture capital industry required less interaction with CEOs, whereas VCs with greater experience in the portfolio company's industry interacted more frequently with CEOs than did VCs without such experience.Determinants of Value AddedWe argued that VCs would most add value to ventures when the venture lacked resources or faced perceived business risks, when the task environment was highly uncertain, and when VCs had great investing and operating experience. Contrary to expectations, VCs added most value to those ventures already performing well. As we had predicted, VCs did add relatively more value when uncertainty was high: e.g., for ventures in the earliest stages and for ventures pursuing innovation strategies. Finally, we found that VCs with operating experience in the venture's focal industry added significantly more value than those with less industry-specific experience. These results are consistent with anecdotal evidence that entrepreneurs have a strong preference for VCs with similar backgrounds as their own. We found no evidence that experience in the venture capital industry contributed significantly to value added. Together, these results suggest that investigations of the social as well as economic dimensions of venture building may prove a fruitful avenue for future study. Overall, the results showed that value-added is strongly related to the amount of face-to-face interaction between VC-CEO pairs and to the number of hours VCs put in on each individual venture.Implications for Venture CapitalistsThe competition for attractive investments is heating up as economies become more globalized. Thus, the pressure on venture capital firms to operate both efficiently and effectively is also likely to build. It is as yet unclear whether the recent trend toward later stage, safer investments will continue, and how those venture capital firms following this path can differentiate themselves from other sources of capital. Venture capital firms that are able to choose the appropriate bases for determining governance effort and the appropriate roles for delivering added value to their portfolio companies will be those most likely to survive.In the largest, most robust markets (i.e., the United States and the United Kingdom), more effort is expended by venture capitalists to deliver something of value beyond the money. This suggests that the tradeoff preferred by those succeeding is to be more rather than less involved in their investments. Our results indicate that VCs clearly economize on the time they devote to involvement in their portfolio companies. However, our results also indicate that they do this at the great peril of producing value insufficient to justify the cost of their product.Implications for EntrepreneursOur findings provide two important insights for entrepreneurs. First, they show that where and when they obtain venture capital is likely to have an impact on the extent and nature of effort delivered by their venture capital investors. It appears that on average entrepreneurs receiving venture capital in the United States and the United Kingdom will be more closely monitored and will receive more value-adding effort from their VCs than will those in France or the Netherlands. Needless to say, entrepreneurs should consider their preferences for level and type of involvement from their investors as they consider their choice of partners. In France, for example, VCs put great emphasis on their financial role in comparison with other roles, but they contribute much less than VCs elswhere via other strategic, interpersonal, and networking roles.The second key implication of our findings is that entrepreneurs may be able to gauge what roles VCs will see as most important, when VCs are more or less apt to become involved in their companies, and when they believe they can most add value. Such knowledge may help CEOs anticipate VC activity, be aware of the parameters of VCs' preferences, communicate their own preferences, and negotiate the timing and extent of interaction. For example, although our results indicate that geographic distance significantly limits face-to-face interaction, it appears to have less impact on the amount of value added.Implications for ResearchersMuch more can be learned about the relative efficiency and effectiveness of alternative governance arrangements. Little is known about how formal structures such as contract covenants and board control work in conjunction with informal oversight and interaction. Even less is known about how value is added and how it is best measured. Although this study took a step toward developing a model of the circumstances under which value is added, the theory and its operationalization await further development.     

Singapore Venture Capitalists (VCs) Investment Evaluation Criteria: A Re-Examination

The Venture capital (VC) industry in Singapore is of recent origin. However, funds under management in Singapore have grown from S$45 million in 1983 to S$7.86 billion in 1996. These developments together with the recent announcement of government's vision of Singapore becoming a hub for venture capital in the region provide an opportunity for an examination of the venture capital industry in Singapore. The VC industry originated in the Western Hemisphere in response to the need for risk capital for high technology industries. In the light of the differences in investment opportunities around Singapore, and the nature of industrial developments in South East Asia in general, the authors anticipated that the investment criteria employed by Venture Capital Firms (VCs) in Singapore would differ. The results however reveal that criteria adopted by Singapore VCs are not very different from those adopted by VCs in other countries including U.S. The results also confirm that the entrepreneur's characteristics or the top management's capabilities are seen as being primary indicators of the venture's potential. Further examination of VCs investment process revealed that the investment criteria adopted by successful VCs were no different from those adopted by less successful VCs. This confirms that investment selection is a multi-stage process wherein venture assessment is only one of the steps in this process. Before VCs evaluate a venture they screen investment proposals based on their investment preferences or investment strategies. VCs in our sample had definite ideas about where to invest and in what types of firms. How do VCs select appropriate investment strategies, however, has not been adequately dealt in the literature and is a fitting subject for further studies.     

Venture capital investors and foreign listing choices of Chinese companies

We investigate the listing choice of Chinese VC-backed companies between a domestic market and foreign stock markets. Using a comprehensive sample of 2249 IPOs of Chinese companies that went public during the 1994–2013 period, we find that companies backed by Chinese domestic VCs are significantly less likely to list abroad while those backed by foreign VCs or co-invested by foreign and domestic VCs are significantly more likely to do so. We further find that the introduction of a domestic stock market for high-tech start-ups (the ChiNext Board) significantly reduces the likelihood to list abroad. However, the effect of VC participation largely disappears after the introduction of the ChiNext Board, in that the companies backed by foreign or co-invested VCs are more likely to list domestically. Moreover, we find that VC-backed IPOs have larger issuance sizes, but we find no impact on IPO underpricing of these Chinese companies. These results on IPO outcome hold for both the full sample and a matched sample using propensity score matching.     

Cross-border venture capital investments in Asia: Selection and exit performance

We investigate the investment behavior and exit performance of VCs that have pursued expansion outside their home locations, specifically, in Asia. Our findings indicate that, in the Asian VC markets, foreign VCs have relative advantages over local VCs in terms of size and experience while they are at a disadvantage in information collection and monitoring due to both geographic and cultural distances. When investing alone, foreign VCs are more likely to invest in more information-transparent ventures. Partnership with local VCs helps alleviate information asymmetry and monitoring problem and has positive implication for the exit performance of local entrepreneurial firms. Specifically, we find that after controlling for the endogeneity of selection, firms with both foreign and local VC partnership are about 5% more likely to successfully exit.     

Trademarks and venture capital valuation

This study investigates the role of trademarks in the start-up valuations of venture capitalists (VCs). Our results show that the number and breadth of trademark applications have inverted U-shaped relationships with the financial valuations of start-ups by VCs. The findings also indicate that in later funding rounds, the value of trademark applications decreases when the start-up progresses into more advanced development stages. Start-ups should consider these findings when seeking funding from VCs and should stress their market and growth orientations and their willingness to protect their marketing investments by highlighting their trademark activities.     

Heterogeneous venture capital,M&A activity,and market response

This study investigates the effects of venture capital (VC) investment on newly listed firms' merger and acquisition activities and takes the lock-up period into consideration. We find that venture capitalists (VCs) tend to postpone M&A activities during a lock-up period, whereas the inhibition role recedes when the lock-up period expires. VCs with a longer investment period dominate this influence. We also illustrate how the market responds to the M&A announcements of VC-backed firms, with the response varying with VCs' investment period.     

A lack of insight: do venture capitalists really understand their own decision process?

What decision criteria do venture capitalists (VCs) use to make their investment decisions? This question has received much attention within entrepreneurship literature (i.e.,Wells 1974; Poindexter 1976; Tyebjee and Bruno 1984; MacMillan, Seigel, and Subba Narasimha 1985; MacMillan, Zeman, and Subba Narasimha 1987; Robinson 1987; Timmons et al. 1987; Sandberg, Schweiger, and Hofer 1988; Hall and Hofer 1993; Zacharakis and Meyer 1995) for a number of reasons. First, VC-backed ventures achieve a higher survival rate than non-VC-backed businesses (Kunkel and Hofer 1990; Sandberg 1986; Timmons 1994). Second, a better understanding of the decision process may lead to even better survival rates. Finally, entrepreneurs seeking venture funding benefit if they understand what factors are most important to the VC.Although past research has greatly contributed to our understanding of the decision, it may be biased and somewhat misleading. The majority of past studies rely on post hoc methodologies (e.g., interviews and surveys) to capture the decision process. Post hoc methods assume that VCs can accurately relate their own decision processes, but studies from cognitive psychology suggest that people, in particular experts, are poor at introspecting. Introspection is subject to rationalization and post hoc recall biases. Using social judgment theory and the associated lens model as a framework, the current study investigates how well VCs introspect about their own decision process and, by extension, whether the past research efforts are biased.The current research uses policy capturing, a real-time method common in cognitive psychology, to capture the VC's “actual theories in use” versus their “espoused theories” (Hitt and Tyler 1991). Policy capturing requires that VCs make a series of real-time decisions based on various information factors. Regression analysis of each VCs' decision captures how important each of the information factors is to her/his actual decision process. After the VCs make their decisions, they provided a weighting of how they believe they used the information factors. Comparing the captured decision policies to stated decision policies provides a measure of VC insight.The findings suggest that VCs are not good at introspecting about their own decision process. Even within the confines of a controlled experiment, which greatly reduces the amount of information considered, VCs lacked strong understanding of how they made decisions. Most decision-makers would like to have all relevant information available for their decision. However, as more information becomes available, insight diminishes. Finally, this study finds that VCs are very consistent in their decision process, even though they do not necessarily understand how they make their decisions.VCs face a plethora of information when making an investment decision (i.e., business plan, outside consultants, due diligence, etc.). It may be difficult for VCs to truly understand their intuitive decision process because of all the noise caused by this information overload. This lack of systematic understanding impedes learning. VCs cannot make accurate adjustments to their evaluation process if they do not truly understand it. Therefore, VCs may suffer from a systematic bias that impedes the performance of their investment portfolio. The methodology used in this experiment can be modified and used as a training tool for active VCs. In addition, the consistent nature of VC decision-making (even if they do not have a strong understanding of that process) is favorable to the development of decision aides. Decision aides can minimize the danger of salient information (e.g., the lead entrepreneur is a winner) clouding the VC's judgment.Past research also needs to be interpreted in a new light. Although VCs undoubtedly use some of the information cited in past studies, the relative importance of that information needs to be reevaluated. VCs may not, for instance, rely most on the background of the entrepreneurial team. In addition, it is likely that the past studies provide more information factors than VCs actually use. People have a tendency to overstate the information they believe they relied upon and to use far less information (typically three to seven factors) to make a decision than they actually think they use. The methodology used in this experiment has the potential to identify the more relevant information factors cited in previous work.Even though VCs are experts in the new venture funding realm, their decision process has room for improvement. Almost 40% of all backed ventures fail to provide a return to the VC. Considering the billions invested each year, a modest improvement in the failure rate can have a substantial impact on venture portfolio returns. That improvement starts by better understanding the decision process. This study is a step in that direction.     

The impact of institutional sources of capital upon the minority-oriented venture capital industry

Venture capital (VC) funds specializing in investing equity capital in minority-owned businesses have grown rapidly over the past decade, fueled by the willingness of major institutional investors to support this traditionally neglected niche. We investigate impacts of public pension funds upon the minority VC sector. These funds, providing over half of all capital invested in minority VCs, selectively invest, seeking to fund only those VCs likely to generate high returns. Although they attempt to pick the winners, our findings indicate that they have failed to do so. The influence of public pension funds upon the minority VCs is nonetheless real, skewing investing away from traditional practices and toward those of the venture capital mainstream. In the process, minority VCs funded by pension fund money invest in high-tech fields more than other minority-oriented VC funds do. Further, they are less likely to fund minority-owned small firms, focusing increasingly upon firms owned by nonminority Whites. Neither of these trends has resulted in increased returns. Rather, diverting minority-oriented VCs away from their traditional mission of investing in minority firms operating in a broad range of industries has resulted in lower returns over the years studied.     

风险投资家对高科技初创企业商务模式的评价研究

商务模式是高科技初创企业在争取风险资金时,风险投资家考察的核心内容之一。通过风险投资家对商务模式的评价、初创企业商务模式设计中存在的问题分析,可以总结出商务模式可以由价值主张、价值支撑和价值保持来表征,按照这样的价值分析体系来进行商务模式的设计,就使得商务模式更具操作性和科学性,同时,也加深了风险投资家对商务模式的理解,更有效地选择初创企业。     

Venture capitalists' expertise: A call for research into decision aids and cognitive feedback

This article proposes that research into decision aids can improve venture capitalists' (VCs) decision process and decision accuracy and speed up the acquisition of expertise. After reviewing research into the accuracy of decision aids such as bootstrapping models and the use of these models in cognitive learning, we propose that theory on the use and performance of decision aids can have important implications on how VCs gain expertise in predicting new venture performance. This discussion leads to a proposed research agenda.     

VCs' decision processes: Evidence suggesting more experience may not always be better

Decision-making processes employed by venture capitalists (VCs) varying in experience were compared. Results show that for relatively inexperienced VCs, increasing experience is associated with improvements in reliability and performance relative to a benchmark (a bootstrapping model). Beyond a specific point, however, further gains in experience are associated with actual reductions in reliability and performance. Thus, greater experience at the venture capital task may not always result in better decisions.     

Conflicts and Regrets in the Venture Capitalist–Entrepreneur Relationship

The goal of this paper is to examine whether conflicts with venture capitalists (VCs) could prompt chief executive officers (CEOs) to experience regret of action (regarding their poor partner choice) or regret of inaction (regarding their own inability to avert conflict). We argue that it is important to examine such feelings of regret that could motivate CEOs to change their financial intermediation and collaboration strategies in the future. We propose that VCs and CEOs may experience two types of conflict: (1) pacing conflicts regarding the direction and speed of venture advancement driven by perceived inequities in economic and social exchange; and (2) prerogative conflicts about the allocation of control rights and relationship issues driven by the perceived inequities in power relations. We hypothesize that pacing conflicts will be related to increasingly intense prerogative conflicts, whereas the latter will be associated with both types of CEO regret. The proposed model is tested with structural equation modeling techniques applied to the data collected from104 CEOs of VC‐backed ventures. All the hypotheses are supported. Our main finding is that CEOs appear to be ambivalent about their conflict with VCs, regretting both their prior choices as an error of judgment (regret of action) and their own lack of initiative (regret of inaction).     

带偏射补偿机制的Birkhoff-von-Neumann交换机方案及其性能分析

Birkhoff-von-Neumann（BvN）交换机具有较低的执行复杂度和较高的吞吐量,但无法在业务突发的环境下提供性能保证。为此,提出一种带偏射的BvN（D-BvN）交换机制来增强交换机性能。D-BvN交换机通过平均业务矩阵的BvN分解,为每个虚电路（VC）提供均值带宽保证,同时通过偏射来处理业务突发。其主要思想是利用处于空闲状态的VC的闲置容量处理处于溢出状态的VC的溢出业务。具体地,偏射机制利用空闲VC的闲置容量完成两件事情：一是把溢出业务偏射到其他VC,二是给偏射业务提供到达目的端口的带宽。分析和仿真结果表明,所提方法不仅可以获得接近100%的输入负载吞吐量,而且具有较低的包乱序概率和较小的业务包延时。     

International entrepreneurship, venture capital networks, and reinvestment decisions

Prior research has established that venture capitalists (VCs) may face significant obstacles in financing ventures from emerging or transition economies. Such hurdles are usually attributed to the weaknesses of host countries’ institutional systems, especially regulatory. These institutional pitfalls may thwart VCs’ ability to exit a portfolio company leading to lower returns than expected. Developing this approach, we argue that exit strategies may also be difficult to execute when VCs expand into advanced economies although for different reasons. Thus, we show that both necessity entrepreneurship prevalent in emerging economies and opportunity entrepreneurship prevalent in advanced economies are positively associated with the number of investment rounds received by portfolio companies. In contrast, we establish that VC firm capital and network density are negatively associated with the number of rounds provided to portfolio companies across distinct institutional environments. This suggests that VCs may improve their performance by choosing an appropriate strategy to navigate unfamiliar institutional environments to minimize their liability of foreignness. Finally, we find that the interaction of VC capital and network density is positively related to the number of VCs’ investment rounds. Apparently, resource-rich VC firms may not fully realize the informational benefits of their dense “knowledge networks” due to insufficient collaboration with partners. At the same time, such VCs may no longer enjoy access to free information flows from prospective allies. Hence, network density and superior resources combined may lead to a greater number of investment rounds.