What factors determine the use of venture capital? evidence from the Irish software sector

Abstract

We address the venture capital financing issue from the firm's perspective. Using survey data for 110 new technology-based firms (NTBFs) in the Irish software sector, we assess the extent to which five human capital and three other variables determine the firm's use of venture capital. Education of the lead founder to degree level is the only significant human capital variable, and it is directly related to the likelihood of being venture capital-backed. Venture capital-backed firms have significantly higher start-up costs, and their founders are less averse to loss of control than non-venture capital-backed firms. We conclude that the use of venture capital is dictated largely by the willingness of founders to relinquish control.

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