This paper examines the deal origination and the selection process adopted by philanthropic venture capitalists when deciding which social organizations to include in the portfolio they manage. The origination and screening practices as well as the selection variables explicitly considered by philanthropic venture capitalists are then compared to those taken into account by traditional for-profit venture capitalists to understand whether or not the behaviour of the two investor categories is the same. The research is based on a sample representing 54% of the European and US population of philanthropic venture capitalists. Philanthropic venture capitalists appear to originate and select deals like traditional venture capitalists. However, they also adopt different deal origination criteria which are not traditionally used by venture capitalists, i.e., incubation and direct creation of an organization in the event of not finding a suitable organization. Furthermore, selection variables such as "deal terms" and "technology" are not considered to be as important as in the case of venture capital.

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Scarlata, Maria Rosa Giovanna; Alemany Gil, Luisa

How do philanthropic venture capitalists choose their portfolio companies?

05/2010
itemDefault This paper examines the deal origination and the selection process adopted by philanthropic venture capitalists when deciding which social organizations to include in the portfolio they manage. The origination and screening practices as well as the selection variables explicitly considered by philanthropic venture capitalists are then compared to those taken into account by traditional for-profit venture capitalists to understand whether or not the behaviour of the two investor categories is the same. The research is based on a sample representing 54% of the European and US population of philanthropic venture capitalists. Philanthropic venture capitalists appear to originate and select deals like traditional venture capitalists. However, they also adopt different deal origination criteria which are not traditionally used by venture capitalists, i.e., incubation and direct creation of an organization in the event of not finding a suitable organization. Furthermore, selection variables such as "deal terms" and "technology" are not considered to be as important as in the case of venture capital.
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How do philanthropic venture capitalists choose their portfolio companies?
Scarlata, Maria Rosa Giovanna; Alemany Gil, Luisa
Rochester (United States of America) 05/2010
SSRN working paper series; ; n 1343563
21 p.
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