Determinants of required return in venture capital investments: A five-country study

Sophie Manigart, Koen De Waele, Mike Wright, Ken Robbie, Philippe Desbrières, Harry J. Sapienza, Amy Beekman

Research output: Contribution to journalArticlepeer-review

183 Scopus citations


Using two complementary theoretical perspectives, we develop hypotheses regarding the determinants of the return required by venture capitalists and test them on a sample of over 200 venture capital companies (VCCs) located in five countries. Consistent with resource-based theory, we find that early-stage specialists require a significantly higher return than other VCCs when investing in later-stage ventures. Consistent with financial theory, we find that acquisition/buyout specialists require a significantly lower return than other VCCs when investing in expansion companies. Furthermore, in comparison to specialists, highly stage-diversified VCCs require a significantly higher return for early-stage investments. Independent VCCs require a higher rate of return than captive or public VCCs. In general, higher required returns are associated with VCCs who provide more intensity of involvement, have shorter expected holding period of the investment, and being located in the US or UK (in comparison to those in France, Belgium, and The Netherlands).

Original languageEnglish (US)
Pages (from-to)291-312
Number of pages22
JournalJournal of Business Venturing
Issue number4
StatePublished - Jul 2002

Bibliographical note

Funding Information:
We acknowledge the financial support of the “Eigen Onderzoeksfonds” of University Ghent, the Deloitte and Touche Corporate Finance, and Barclays Private Equity for CMBOR and the Center for International Business Education and Research” of the University of South Carolina. We thank the editor and an anonymous reviewer for their helpful comments.


  • Diversification
  • Required return
  • Specialization
  • Venture capital


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