Persistence Pays: Evidence from Investment Style Dynamics in the Venture Capital Industry

July 16, 2013 Leave a comment

Persistence Pays: Evidence from Investment Style Dynamics in the Venture Capital Industry

Amit Bubna Indian School of Business

Sanjiv Ranjan Das Santa Clara University – Leavey School of Business

Paul Hanouna Villanova University – School of Business

June 20, 2013

Abstract: 
We examine style drift in venture capital investing using 344,491 VC firm-financing rounds between 1980 and 2010. We locate each VC financing round in one of twenty styles, and develop a measure of a change in a VC’s styles (“style drift”) that is time consistent and independent of firm size. VC firms that exhibit style persistence outperform those that drift. VCs in the early years of their lifecycle exhibit greater style drift. Style drift hurts performance for seasoned VCs and for VCs that drift in a correlated (herd) fashion with other VC firms. We find evidence for economies of style persistence.

Filed under Research

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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