Trends in Venture Capital Finance in Developing Countries

This paper focuses on venture capital finance in developing countries, the structuring of these funds, and how they are managed to maximize investment value.

The paper attempts to address the following issues through an empirical study of data gathered from 53 venture capital funds in 19 developing countries and regional venture capital associations in Asia and Europe:

• Recent trends in venture capital financing activity in terms of:
  • Source of investment funds by: region; country; and type of investing institution;
  • Rate of investment of these funds;
  • Distribution of investments: across industries; by maturity of recipient company.
• Patterns evident in organizational forms and incentive features of venture capital firms;
• Extent of managerial discretion and investment policies followed;
• Selection of investment portfolio and role of parent/ affiliate companies in the process;
• Characteristics of investee company in terms of:
  • Capital structure;
  • Governance arrangements;
  • Expected returns;
  • Renegotiation experience.

The author concludes by summarizing the trends and patterns emerging from the empirical survey. He identifies factors that are critical to venture fund investment performance and the organizational structures with which they are associated.