Title: Risk types and risk assessment in venture capital investments: a content analysis of investors' original documents

Authors: Dorian Proksch; Wiebke Stranz; Andreas Pinkwart

Addresses: Stiftungsfonds Deutsche Bank Chair of Innovation Management and Entrepreneurship, HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany ' Stiftungsfonds Deutsche Bank Chair of Innovation Management and Entrepreneurship, HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany ' Stiftungsfonds Deutsche Bank Chair of Innovation Management and Entrepreneurship, HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany

Abstract: Venture capital is an important resource for new ventures with no access to the capital market. However, venture capital companies' investment decisions could be extremely risky. Assessing and managing risk is therefore a major task of venture capital companies. Despite the topic's high practical relevance, there is very little literature in this field. We aim to extend the academic discussion by investigating the risk types and risk assessment in venture capital investments. We analysed more than 500 deal documents of nine German venture capital companies, resulting in 2,452 qualitative quotes. We categorised these quotes into seven risk types, namely financial, market, strategy, technology, production, human capital, and legal risks, implying their relevance during the VC investment process. Market risk and technology risk are mentioned the most in the due diligence and the decision papers. Financial risk with 710 quotes is the most often documented risk considering all venture capital documents.

Keywords: risk; risk assessment; risk management; venture capital; new technology-based firms; new ventures.

DOI: 10.1504/IJEV.2018.094614

International Journal of Entrepreneurial Venturing, 2018 Vol.10 No.5, pp.513 - 533

Received: 06 Mar 2016
Accepted: 10 Jun 2016

Published online: 05 Sep 2018 *

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