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Venture Capitalists' Risk Mitigation of Portfolio Company Internationalization

Authors


  • The authors wish to acknowledge the assistance of Anita McGahan, Jeffrey Furman, and Isin Guler in the development of this paper, along with comments by participants in the workshop ȜReassessing the Relationships between Private Equity Investors and Their Portfolio Companiesȝ at Vlerick Leuven University in September 2010, the input of Zied Guedri and Bernard Forgues, and the comments of anonymous reviewers.

Abstract

This study examines the differential application of mechanisms that venture capitalists use to mitigate the risks of portfolio company internationalization. We investigate differences in round size, round interval, and round syndication between new ventures that internationalize (with a fraction of revenue from abroad) and solely domestic new ventures, using longitudinal data of 962 investing rounds in 334 venture capital-backed technology companies. While opportunistic internationalizers (ratio of foreign sales to total sales less than 10%) receive less funding per round by smaller syndicates over longer intervals than domestic ventures, higher intensity strategic internationalizers receive their funding in shorter intervals.

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