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Peter Kelly, London Business School
Michael Hay, London Business School
Introduction
Conceptual Background
Sample and Methodology
Findings
Discussion
The Link with Performance
Table 2: Solo Investment Summary
Tabel 3: Syndicate Investment Summary
Conclusions
Implications
Directions for Future Research
References
This study is, to the best of our knowledge, the first attempt to: i) examine a specific sub-segment of the informal venture capital market in the UK, namely, investors who have made at least three private investments ("serial investors"); and ii) explore the linkage between investor characteristics, investment activity and performance. Eight serial investors provided detailed information on forty-one private investments. Two distinct groups emerged; one which invested on their own all the time ("solo investors") and the other which invested with others almost exclusively ("syndicate investors"). Both groups displayed a propensity to invest in a variety of industrial sectors with more than 70% of the investments made in industries where the investor or the group had no direct experience. Concept familiarity appeared to be a necessary, albeit insufficient, prerequisite to the decision to invest. In a majority of cases for both groups, investor(s) backed individuals personally known by at least one investor and/or the deal referrer.
When the linkage to performance was explored, it became evident that solo investors are well advised to restrict their investment activity to industries in which they have direct experience and by backing individuals known to them or to the deal referrer. Syndicate investors seem to be better able to manage a diversified industrial portfolio, however, they are well advised to back entrepreneurs known to them personally or to other members of the group. Uniformly, both groups reported that the ideal portfolio size is between four and five investments.
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