A Venture Perspective of Different Investor Effects in the Brazilian VC Market
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Abstract
Objective: Venture capital has garnered global interest, attracting policymakers, investors, and entrepreneurs. However, its implementation in emerging nations, particularly in the challenging seed-stage segment, requires adaptive strategies from investors. This article investigates whether these adaptations lead to performance differences among various VC investor types. Methods: We examine the impact of different investor types on the performance of seed-stage ventures in Brazil, comparing our findings to existing literature on the United States. Analyzing investments in the Brazilian seed-stage VC market from 2000 to September 2022, we evaluate outcomes for ventures supported by IVCs, CVCs, Angels, and Accelerators. Results: The results reveal significant disparities in the performance of these entities in Brazil compared to the United States. Conclusions: We conclude that these differences likely stem from unique Brazilian market dynamics that have shaped investor profiles and operational approaches distinct from those in developed nations.
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Silva, R. A. B. da, Paula, F. de O., & Silva, J. F. da. (2024). A Venture Perspective of Different Investor Effects in the Brazilian VC Market. Brazilian Administration Review, 21(2), e230093. https://doi.org/10.1590/1807-7692bar2024230093
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References
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Chesbrough, H. W. (2002). Making sense of corporate venture capital. Harvard Business Review. https://hbr.org/2002/03/making-sense-of-corporate-venture-capital
Choi, Y., & Kim, D. (2018). The effects of investor types on investees’ performance: Focusing on the seed accelerator. Cogent Economics and Finance, 6(1), 1550870. https://doi.org/10.1080/23322039.2018.1550870
Cohen, S., Fehder, D. C., Hochberg, Y. V., & Murray, F. (2019). The design of startup accelerators. Research Policy, 48(7), 1781-1797. https://doi.org/10.1016/j.respol.2019.04.003
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Dalal, A. (2022). Meta-analysis of determinants of venture capital activity. Entrepreneurial Business and Economics Review, 10(1), 113-128. https://doi.org/10.15678/EBER.2022.100108
Dias, R. S., & Silva, M. A. (2016). Private equity and venture capital funds: What drives the demand and supply? Brazilian Administration Review, 13(2), e150058. https://doi.org/10.1590/1807-7692bar2016150058
Dutta, S., & Folta, T. B. (2016). A comparison of the effect of angels and venture capitalists on innovation and value creation. Journal of Business Venturing, 31(1), 39-54. https://doi.org/10.1016/j.jbusvent.2015.08.003
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Gompers, P., & Lerner, J. (2001). The venture capital revolution. Journal of Economic Perspectives, 15(2), 145-168. https://doi.org/10.1257/jep.15.2.145
Gonzalez-Uribe, J., & Leatherbee, M. (2018) The effects of business accelerators on venture performance: Evidence from startup Chile. Review of Financial Studies, 31(4), 1566-1603. https://doi.org/10.1093/rfs/hhx103 Gonzalo, M., Guimaraes Alves, N., Federico, J., Szapiro, M., & Kantis, H. (2022). Venture capital industry emergence and development in India and Brazil: The role of the state and challenges for the global south countries. Innovation and Development, 14(1), 67-88. https://doi.org/10.1080/2157930X.2022.2065721
Gornall, W., & Strebulaev, I. A. (2015). The economic impact of venture capital: Evidence from public companies [Working Paper No 3362]. Standford Business.
Groh, A. P., & Wallmeroth, J. (2016). Determinants of venture capital investments in emerging markets. Emerging Markets Review, 29, 104-132. https://doi.org/10.1016/j.ememar.2016.08.020
Hellmann, T., & Puri, M. (2002). Venture capital and the professionalization of start-up firms: Empirical evidence. Journal of Finance, 57(1), 169-197. https://doi.org/10.1111/1540-6261.00419
Jeng, L. A., & Wells, P. C. (2000). The determinants of venture capital funding: Evidence across countries. Journal of Corporate Finance, 6(3), 241-289. https://doi.org/10.1016/S0929-1199(00)00003-1
Kaplan, S. N., & Lerner, J. (2010). It ain’t broke: The past, present, and future of venture capital. Journal of Applied Corporate Finance, 22(2), 36-47. https://doi.org/10.1111/j.1745-6622.2010.00272.x
Katila, R., Rosenberger, J. D., & Eisenhardt, K. M. (2008). Swimming with sharks: Technology ventures, defense mechanisms and corporate relationships. Administrative Science Quarterly, 53(2), 295-332. https://doi.org/10.2189/asqu.53.2.295
Kerr, W. R., Lerner, J., & Schoar, A. (2014). The consequences of entrepreneurial finance: Evidence from angel financings. Review of Financial Studies, 27(1), 20- 55. https://doi.org/10.1093/rfs/hhr098
Keuschnigg, C. (2004). Venture capital backed growth. Journal of Economic Growth, 9(2), 239-261. https://doi.org/10.1023/B:JOEG.0000031428.35711.fc
Kim, J. Y., Steensma, H. K., & Park, H. D. (2019). The influence of technological links, social ties, and incumbent firm opportunistic propensity on the formation of corporate venture capital deals. Journal of Management, 45(4), 1595-1622. https://doi.org/10.1177/0149206317720722
Leonel, S. (2019). O papel e as contribuições da indústria de venture capital no Brasil. Revista Economia Ensaios, 33, 125-142. https://doi.org/10.14393/REE-v33n0a2019-50418
Matos, F., & Radaelli, V. (2020). Ecossistema de startups no brasil: Estudo de caracterização do ecossistema brasileiro de empreendedorismo de alto impacto. Banco Interamericano de Desenvolvimento. https://doi.org/10.18235/0002222
Nahata, R. (2008). Venture capital reputation and investment performance. Journal of Financial Economics, 90(2), 127-151. https://doi.org/10.1016/j.jfineco.2007.11.008
National Venture Capital Association. (2020). National Venture Capital Association Yearbook. PitchBook. Washington, DC, USA. https://nvca.org/wp-content/uploads/2020/04/NVCA-2020-Yearbook.pdf
Park, H. D., & Steensma, H. K. (2012). When does corporate venture capital add value for new ventures?. Strategic Management Journal, 33, 1-22. https://doi.org/10.1002/smj.937
Popov, A., & Roosenboom, P. (2013). Venture capital and new business creation. Journal of Banking and Finance, 37(12), 4695-4710. https://doi.org/10.1016/j.jbankfin.2013.08.010
Ribeiro, L. D. L., & Carvalho, A. G. (2008). Private equity and venture capital in an emerging economy: Evidence from Brazil. Venture Capital, 10(2), 111-126. https://doi.org/10.1080/13691060801946121
Rosenbusch, N., Brinckmann, J., & Müller, V. (2013). Does acquiring venture capital pay off for the funded firms? A meta-analysis on the relationship between venture capital investment and funded firm financial performance. Journal of Business Venturing, 28(3), 335-353. https://doi.org/10.1016/j.jbusvent.2012.04.002
Samila, S., & Sorenson, O. (2011). Venture capital, entrepreneurship, and economic growth. Review of Economics and Statistics, 93(1), 338- 349. https://doi.org/10.1162/REST_a_00066
Schnitzer, M., & Watzinger, M. (2022). Measuring the spillovers of venture capital. Review of Economics and Statistics, 104(2), 276-292. https://doi.org/10.1162/rest_a_00937
Sheetz, M. (2017). Technology killing off corporate America: Average life span of companies under 20 years. https://www.cnbc.com/2017/08/24/technologykilling- off-corporations-average-lifespan-of-company-under-20-years.html
Shetty, S., Sundaram, R., & Achuthan, K. (2020). Assessing and comparing top accelerators in Brazil, India and USA: Through the lens of new ventures’ performance. Entrepreneurial Business and Economics Review, 8(2), 153-177. https://doi.org/10.15678/EBER.2020.080209
Silva, R., Paula, F., & Silva, J. (2022, June 15-17). The effects of different entrepreneurial equity financing sources on seed and early-stage ventures performance. EURAM 2022 Conference, Winterthur, Switzerland.
Sorensen, M. (2007). How smart is smart money? A two-sided matching model of venture capital. Journal of Finance, 62(6), 2725-2762. https://doi.org/10.1111/j.1540-6261.2007.01291.x
Uzuegbunam, I., Ofem, B., & Nambisan, S. (2019). Do corporate investors affect entrepreneurs’ IP portfolio? Entrepreneurial finance and intellectual property in new firms. Entrepreneurship: Theory and Practice, 43(4), 673-696. https://doi.org/10.1177/1042258717738247
Yu, S. (2020). How do accelerators impact the performance of high-technology ventures? Management Science, 66(2), 503-1004. https://doi.org/10.1287/mnsc.2018.3256
Anthony, B. S., Viguerie, S. P., Schwartz, E. I., & Landeghem, J. V. (2018). 2018 Corporate Longevity Forecast: Creative Destruction is Accelerating. INNOSIGHT. https://www.innosight.com/wp-content/uploads/2017/11/ Innosight-Corporate-Longevity-2018.pdf
Associação Brasileira de Private Equity e Venture Capital. (2021). Inside VC – Venture Capital in Brazil. https://www.abvcap.com.br/pesquisas/estudos.aspx?c=en-us
Associação Nacional de Entidades Promotoras de Empreendimentos Inovadores. (2019). Mapeamento dos mecanismos de geração de empreendimentos inovadores no Brasil. https://anprotec.org.br/site/wpcontent/ uploads/2019/09/Mapeamento_Empreendimentos_Inovadores.pdf
Bascle, G. (2008). Controlling for endogeneity with instrumental variables in strategic management research. Strategic Organization, 6(3), 285-327. https://doi.org/10.1177/1476127008094339
Bertoni, F., Colombo, M. G., & Grilli, L. (2013). Venture capital investor type and the growth mode of new technology-based firms. Small Business Economics, 40, 527-552. https://doi.org/10.1007/s11187-011-9385-9 Brander, J. A., Amit, R., & Antweiler, W. (2002). Venture-capital syndication: Improved venture selection vs. the value-added hypothesis. Journal of Economics and Management Strategy, 11(3), 423-452. https://doi.org/10.1111/j.1430-9134.2002.00423.x
Chancel, L., Piketty, T., Saez, E., & Zucman, G. (2022). World Inequality Report 2022. World Inequality Lab. https://wir2022.wid.world/www-site/ uploads/2023/03/D_FINAL_WIL_RIM_RAPPORT_2303.pdf
Chemmanur, T. J., Krishnan, K., & Nandy, D. K. (2011). How does venture capital financing improve efficiency in private firms? A look beneath the surface. Review of Financial Studies, 24(12), 4037-4090. https://doi.org/10.1093/rfs/hhr096
Chesbrough, H. W. (2002). Making sense of corporate venture capital. Harvard Business Review. https://hbr.org/2002/03/making-sense-of-corporate-venture-capital
Choi, Y., & Kim, D. (2018). The effects of investor types on investees’ performance: Focusing on the seed accelerator. Cogent Economics and Finance, 6(1), 1550870. https://doi.org/10.1080/23322039.2018.1550870
Cohen, S., Fehder, D. C., Hochberg, Y. V., & Murray, F. (2019). The design of startup accelerators. Research Policy, 48(7), 1781-1797. https://doi.org/10.1016/j.respol.2019.04.003
Crisan, E. T., Salanta, I. I., Beleiu, I. N., Bordean, O. N., & Bunduchi, R. (2019). A systematic literature review on accelerators. Journal of Technology Transfer, 46, 62-89. https://doi.org/10.1007/s10961-019-09754-9 Crunchbase Data. (2022). Cruchbase DataBase. http://data.crunchbase.com
Cumming, D., & Zhang, M. (2019). Angel investors around the world. Journal of International. Business Studies, 50, 692-719. https://doi.org/10.1057/s41267-018-0178-0
Dalal, A. (2022). Meta-analysis of determinants of venture capital activity. Entrepreneurial Business and Economics Review, 10(1), 113-128. https://doi.org/10.15678/EBER.2022.100108
Dias, R. S., & Silva, M. A. (2016). Private equity and venture capital funds: What drives the demand and supply? Brazilian Administration Review, 13(2), e150058. https://doi.org/10.1590/1807-7692bar2016150058
Dutta, S., & Folta, T. B. (2016). A comparison of the effect of angels and venture capitalists on innovation and value creation. Journal of Business Venturing, 31(1), 39-54. https://doi.org/10.1016/j.jbusvent.2015.08.003
Fitza, M., Matusik, S. F., & Mosakowski, E. (2009). Do VCS matter? The importance of owners on performance variance in startup firms. Strategic Management Journal, 30(4), 387-404. https://doi.org/10.1002/smj.748 Gompers, P., & Lerner, J. (1998). The determinants of corporate venture capital success organizational structure, incentives, and complementarities [Working Paper No 6725]. National Bureau of Economic Research. Cambridge, MA, USA. https://doi.org/10.3386/w6725
Gompers, P., & Lerner, J. (2001). The venture capital revolution. Journal of Economic Perspectives, 15(2), 145-168. https://doi.org/10.1257/jep.15.2.145
Gonzalez-Uribe, J., & Leatherbee, M. (2018) The effects of business accelerators on venture performance: Evidence from startup Chile. Review of Financial Studies, 31(4), 1566-1603. https://doi.org/10.1093/rfs/hhx103 Gonzalo, M., Guimaraes Alves, N., Federico, J., Szapiro, M., & Kantis, H. (2022). Venture capital industry emergence and development in India and Brazil: The role of the state and challenges for the global south countries. Innovation and Development, 14(1), 67-88. https://doi.org/10.1080/2157930X.2022.2065721
Gornall, W., & Strebulaev, I. A. (2015). The economic impact of venture capital: Evidence from public companies [Working Paper No 3362]. Standford Business.
Groh, A. P., & Wallmeroth, J. (2016). Determinants of venture capital investments in emerging markets. Emerging Markets Review, 29, 104-132. https://doi.org/10.1016/j.ememar.2016.08.020
Hellmann, T., & Puri, M. (2002). Venture capital and the professionalization of start-up firms: Empirical evidence. Journal of Finance, 57(1), 169-197. https://doi.org/10.1111/1540-6261.00419
Jeng, L. A., & Wells, P. C. (2000). The determinants of venture capital funding: Evidence across countries. Journal of Corporate Finance, 6(3), 241-289. https://doi.org/10.1016/S0929-1199(00)00003-1
Kaplan, S. N., & Lerner, J. (2010). It ain’t broke: The past, present, and future of venture capital. Journal of Applied Corporate Finance, 22(2), 36-47. https://doi.org/10.1111/j.1745-6622.2010.00272.x
Katila, R., Rosenberger, J. D., & Eisenhardt, K. M. (2008). Swimming with sharks: Technology ventures, defense mechanisms and corporate relationships. Administrative Science Quarterly, 53(2), 295-332. https://doi.org/10.2189/asqu.53.2.295
Kerr, W. R., Lerner, J., & Schoar, A. (2014). The consequences of entrepreneurial finance: Evidence from angel financings. Review of Financial Studies, 27(1), 20- 55. https://doi.org/10.1093/rfs/hhr098
Keuschnigg, C. (2004). Venture capital backed growth. Journal of Economic Growth, 9(2), 239-261. https://doi.org/10.1023/B:JOEG.0000031428.35711.fc
Kim, J. Y., Steensma, H. K., & Park, H. D. (2019). The influence of technological links, social ties, and incumbent firm opportunistic propensity on the formation of corporate venture capital deals. Journal of Management, 45(4), 1595-1622. https://doi.org/10.1177/0149206317720722
Leonel, S. (2019). O papel e as contribuições da indústria de venture capital no Brasil. Revista Economia Ensaios, 33, 125-142. https://doi.org/10.14393/REE-v33n0a2019-50418
Matos, F., & Radaelli, V. (2020). Ecossistema de startups no brasil: Estudo de caracterização do ecossistema brasileiro de empreendedorismo de alto impacto. Banco Interamericano de Desenvolvimento. https://doi.org/10.18235/0002222
Nahata, R. (2008). Venture capital reputation and investment performance. Journal of Financial Economics, 90(2), 127-151. https://doi.org/10.1016/j.jfineco.2007.11.008
National Venture Capital Association. (2020). National Venture Capital Association Yearbook. PitchBook. Washington, DC, USA. https://nvca.org/wp-content/uploads/2020/04/NVCA-2020-Yearbook.pdf
Park, H. D., & Steensma, H. K. (2012). When does corporate venture capital add value for new ventures?. Strategic Management Journal, 33, 1-22. https://doi.org/10.1002/smj.937
Popov, A., & Roosenboom, P. (2013). Venture capital and new business creation. Journal of Banking and Finance, 37(12), 4695-4710. https://doi.org/10.1016/j.jbankfin.2013.08.010
Ribeiro, L. D. L., & Carvalho, A. G. (2008). Private equity and venture capital in an emerging economy: Evidence from Brazil. Venture Capital, 10(2), 111-126. https://doi.org/10.1080/13691060801946121
Rosenbusch, N., Brinckmann, J., & Müller, V. (2013). Does acquiring venture capital pay off for the funded firms? A meta-analysis on the relationship between venture capital investment and funded firm financial performance. Journal of Business Venturing, 28(3), 335-353. https://doi.org/10.1016/j.jbusvent.2012.04.002
Samila, S., & Sorenson, O. (2011). Venture capital, entrepreneurship, and economic growth. Review of Economics and Statistics, 93(1), 338- 349. https://doi.org/10.1162/REST_a_00066
Schnitzer, M., & Watzinger, M. (2022). Measuring the spillovers of venture capital. Review of Economics and Statistics, 104(2), 276-292. https://doi.org/10.1162/rest_a_00937
Sheetz, M. (2017). Technology killing off corporate America: Average life span of companies under 20 years. https://www.cnbc.com/2017/08/24/technologykilling- off-corporations-average-lifespan-of-company-under-20-years.html
Shetty, S., Sundaram, R., & Achuthan, K. (2020). Assessing and comparing top accelerators in Brazil, India and USA: Through the lens of new ventures’ performance. Entrepreneurial Business and Economics Review, 8(2), 153-177. https://doi.org/10.15678/EBER.2020.080209
Silva, R., Paula, F., & Silva, J. (2022, June 15-17). The effects of different entrepreneurial equity financing sources on seed and early-stage ventures performance. EURAM 2022 Conference, Winterthur, Switzerland.
Sorensen, M. (2007). How smart is smart money? A two-sided matching model of venture capital. Journal of Finance, 62(6), 2725-2762. https://doi.org/10.1111/j.1540-6261.2007.01291.x
Uzuegbunam, I., Ofem, B., & Nambisan, S. (2019). Do corporate investors affect entrepreneurs’ IP portfolio? Entrepreneurial finance and intellectual property in new firms. Entrepreneurship: Theory and Practice, 43(4), 673-696. https://doi.org/10.1177/1042258717738247
Yu, S. (2020). How do accelerators impact the performance of high-technology ventures? Management Science, 66(2), 503-1004. https://doi.org/10.1287/mnsc.2018.3256