Venture capitalists use research alliances, but not patents, as signals of technology quality

Observable resources, particularly patents, alliances, and team experience, are known to affect a start-up’s ability to attract venture capital financing. In this context they potentially fulfill a twofold function: as productive assets and, likely, as signals of characteristics of a venture that are not observable at the time of assessment. In particular, patents, alliances, and team experience may serve as signals of the unobservable quality of a venture’s technology. Using a conjoint-based survey among VCs, Daniel Hoenig and Joachim Henkel find they rely on research alliances and, partly, on team experience as signals of technological quality. While patents affect the venture capitalists’ decision making in their property rights function, there is no indication that they serve as technology quality signals. Free access to the article until May 26, 2015: http://authors.elsevier.com/a/1QptOB5ARtgpL