Portfolio investment strategies in the Finnish venture capital industry: a longitudinal study

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Abstract
The objective of this study is to identify realized strategies of venture capital firms when undertaking portfolio investments. We analysed data for the period 1994 through 1997 on a sample of Finnish venture capital firms representing virtually the entire population of the Finnish venture capital industry. The results indicate that, over time, the venture capital firms specialized the industry scope of their portfolio. Further, the venture capital firms consistently diversified geographically throughout the 4 year period of the study, and they diversified their portfolio in terms of stage-of-growth by investing in increasingly later stage companies through the first years of the study, before entering a period of equilibrium in which this degree of stage-of-growth diversification held relatively constant. Finally, the importance of accumulated experience was illustrated by the finding that less experienced venture capital firms showed a time lag in these investment patterns compared to more experienced firms.

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