VCs a Distinct Species on the Investment Market ?

We address the question: do technology investors differ from traditional investors? Employing a conjoint methodology, we identified 28 technology investors from a sample of 68 European early stage investors. Comparing the two groups of investors we found that: (1) technology investors were not more likely to receive public funding than traditional investors; (2) technology investors had more investment management experience than traditional investors; and (3) technology investors had more consulting experience than traditional investors. Our research has implications for public policy, aimed at resolving the market failure for high tech investments, high tech entrepreneurs looking for VC (venture capital) funding, and VC funds. Introduction Approximately 90% of all venture capital (VC) investment in the US and Canada are in technology investments (Cumming, 2007). In contrast, until the early 1990s there was very little venture capital activity in Europe (Bottazzi and Da Rin, 2002). The European venture capital industry that existed at the start of the 1990s was largely non-technology focused and dominated by management buy-outs and other later-stage development activity (Lockett et al., 2002). As the venture capital industry has increased in size, the share of early stage and high tech investments has also increased, moving closer to the position in the US (Da Rin et al., 2006). However, the number of venture capital operating in Europe still remains considerably smaller than in the US (Da Rin et al., 2006). Murray and Lott (1995), and subsequently Lockett et al. (2002), indicate that in the EU, by the year 2000, the venture capital industry has evolved to a robust and highly international, specialist investment community. Both studies however indicate that venture capital firms in the UK have a bias against investment in new technology based firms. This study aims at understanding what the drivers for technology investing are and how technology VCs differ from the more traditional VCs. In order to distinguish technology investors from traditional investors we examine the investment selection behaviour of early stage VCs. Existing research has identified a number of important criteria on which VC investors base their investment selection decisions. First, the “human capital” of the entrepreneur and the entrepreneurial team, which includes: (a) the ability of management, whether it is management skill, quality of management, characteristics of the management team or the management track record (Shepherd and Zacharakis, 1998); (b) the management skills of the entrepreneur (Tyebjee & Bruno, 1984; MacMillan et al., 1985; 1987); and (c) the heterogeneity of the entrepreneurial team (Keeley and Roure, 1989). Second, the market environment, which includes the characteristics of the market/industry (Hisrich and Jankowitz, 1990), environmental threats to the business (Tyebjee and Bruno,