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Research Projects

What Matters in Venture Capital? Evidence from Entrepreneurs' Stated Preferences

Venture capital firms come in many shapes and sizes, varying based on historical record - or lack thereof - and organizational type. As entrepreneurs form relationships and ultimately select a VC to catalyze their start-up company's growth, what drives the entrepreneurs' decisions and what choices lead to the best outcome for a growing company? Professor Ola Bengtsson's recent research findings expose interesting relationships traits of VC firms and entrepreneurs' stated preferences.

An online community, TheFunded, was developed so that entrepreneurs can "research, rate and review" VCs with numeric rankings and verbal comments. Using hand-collected data from 1,472 unique entrepreneurs rating 526 unique domestic VCs, Bengtsson's research statistically analyzed factors influencing the ratings.

The findings concluded that independent VCs received much higher rankings than other organizational types of VC firms, which could be attributed to fewer restrictions on investments and extrinsic motivation for success. Secondly, while entrepreneurs correctly identified VCs with a strong track record, the rankings did not associate track record with the ability to add value, suggesting that entrepreneurs perceive is no "treatment effect" from working with historically successful VCs. Finally, entrepreneurs who had worked with fewer venture capital firms tended to give higher rankings than those who had worked with a greater number of VCs, with more favorable rankings given to firms from whom financing had been received.

While the data was self-reported, TheFunded is strictly limited to entrepreneurs and the large sample size compensated for the variability of individual rankings. To validate the numeric ranking system, entrepreneurs' verbal comments were hand-coded as favorable or non-favorable, and the same results were reflected. Professor Bengtsson's research provides important data about how entrepreneurs evaluate VC firms based on information such as track record and the organizational type of firm.

Ola Bengtsson is an Assistant Professor of Finance in the College of Business, coming to UIUC from the Johnson School at Cornell University, with MBA and PhD degrees in finance from the University of Chicago's Booth School of Business. His research and teaching is focused on venture capital and entrepreneurial finance. For more information, please visit

Foreign Exchange Rates and the Frequency of Cross-Border Private Equity Transactions

"Changes in relative values of currencies are an influential indicator in the market. However, it is not widely known whether changes in foreign exchange rates affect the frequency of cross-border Private Equity transactions," states Richard Crowley, describing his ongoing research project. "As such, I am working to determine whether the frequency of cross border transactions and changes in exchanges rates are correlated."

It is unusual for an undergraduate student to independently undertake academic research within the field of private equity, but Richard Crowley has conducted his own project over the past two months. Through the Golder Center, Center Director Dan O'Connell helped Crowley by sharing his experience in the business side of private equity, and introducing Crowley to other University of Illinois faculty, including Professor Ola Bengtsson. Professor Bengtsson guided Crowley through the research process step-by-step, helping him organize and conduct the research project. Dr. Martin Maurer and Professor Carissa Phillips also helped Crowley utilize resources available in the Market Information Lab to find data more efficiently.

While modest about his work, Crowley notes that conducting research has been an exciting experience, and that it is very encouraging to work with many supportive professors.

Richard Crowley is a sophomore in the College of Business, majoring in Finance, Accountancy, and Mathematics with a minor in Environmental Economics and Law. This is his second semester of involvement with the Golder Center, where he is the Student Research Fellow and has participated in both the Venture Capital and Buyout competitions.

UIUC College of Business Office of the privateequity