Venture Capital Investment in Minority Business
37 Pages Posted: 20 Sep 2005
Date Written: July 2005
Abstract
This study analyzes the performance of investments made by venture capital (VC) funds that specialize in financing minority business enterprises (MBEs). We explore the hypothesis that financing MBEs offers attractive returns to VC funds because this market niche is underserved. Traits of the VC funds - including their sources of capital and the firms they invest in - are selectively used to explain returns generated by their investments in MBEs. Minority VC funds collectively earn yields on their realized investments that are higher than those of the broader VC industry, but these yields vary greatly from fund to fund. VC fund traits that predict high yields on individual investments are identified by estimating multivariate regressions explaining net investment returns.
Keywords: Venture Capital, Minority Business
JEL Classification: G24, M13
Suggested Citation: Suggested Citation
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