RT Journal Article
SR Electronic
T1 The Practice of the Life Science Venture Capital Industry: <em>Compensation, Deal Flow, and Contracts</em>
JF The Journal of Private Equity
FD Institutional Investor Journals
SP 56
OP 66
DO 10.3905/jpe.2011.15.1.056
VO 15
IS 1
A1 Hisanori Fujiwara
A1 Hiromichi Kimura
YR 2011
UL https://pm-research.com/content/15/1/56.abstract
AB This study examines 32 independent and corporate venture capital firms investing in biotechnology and medical device companies. When investing funds in entrepreneurial companies, life science venture capitalists prefer direct involvement over involvement through a third-party fund. Early stage and seed stage are the most and least popular stages, respectively, at which venture capitalists prefer to invest. In our sample, 80% of all firms almost always or frequently use carried interest in portfolio businesses and about 20% never use it. The preferences of the venture capital firms that award low- and high-powered incentives in the sourcing of deal flows and designing contracts are significantly different. The incentive system of venture capital firms is shown to play an important role in promoting an active investment behavior.TOPICS: Private equity, portfolio construction, quantitative methods, real assets/alternative investments/private equity