On the Life Cycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms. THE JOURNAL OF FINANCE • VOL. LXVII, NO. 6 • DECEMBER 2012
...the key firm characteristic on which VC focuses is scale or potential for scale, rather than short-term profitability.
Although the common wisdom in Silicon Valley is that VCs select for the best team, the data tells us that potential scale of the startup matters the most. This finding strengthens the argument we put forward in Scalable Innovation: scalability of the target innovation space is the fundamental differentiator between successful and unsuccessful innovation attempts.
* Source: Puri, Manju and Zarutskie, Rebecca, On the Lifecycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms (June 13, 2010). EFA 2007 Ljubljana Meetings Paper; US Census Bureau Center for Economic Studies Paper No. CES-WP-08-13. Available at SSRN: http://ssrn.com/abstract=967841 or http://dx.doi.org/10.2139/ssrn.967841