Staged Capital and Financial Performance of Venture Capital Firms in Kenya

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dc.contributor.advisorJ.M Theurien_US
dc.contributor.advisor
dc.contributor.authorWaithiegeni, Nderitu Mary
dc.date.accessioned2021-11-08T10:26:37Z
dc.date.available2021-11-08T10:26:37Z
dc.date.issued2021
dc.descriptionA Research Project Submitted in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (Finance Option), School of Business, Kenyatta University, May 2021en_US
dc.description.abstractVenture capital industry in Kenya is still in its nascent stage lagging behind both supply and demand side. Since inception of the venture capital industry in Kenya in 1970s several venture capital firms have collapsed and others exited the market due to poor financial performance. The rule of thumb in venture capital industry suggests that out of ten investments only one or two are successful. This makes venture capital industry an extremely high risk investment sector with a high probability of failure. This is painful to venture capitalist since they invest their resources with expectation of high returns from the invested project. To solve the problem of underperformance and huge losses in case of project failure, over 90% venture capital firms stage their financing rather than upfront financing. It gives an option of abandoning poorly performing projects before injecting more capital in subsequent rounds. Existing literature often act a source of knowledge when making critical decisions like staged capital financing. Nevertheless, different scholars have different opinions on effect of staging on financial performance of venture capital firms. These studies have concentrated on developed nations but not as much in developing ones leaving venture capitalist in these nation’s with limited reference in their context. This study therefore sought to fill this gap in knowledge by looking at staged capital on financial performance of venture capital firms in Kenya to act as a basis for decision making for venture capital firms in Kenya and developing nations. The study objectives were; to determine effect of early stage venture capital financing on financial performance of venture capital firms in Kenya, to establish the effect of growth stage venture capital financing on financial performance of venture capital firms in Kenya, to establish the effect of growth stage venture capital financing on financial performance of venture capital firms in Kenya. The study was anchored on agency, transactional cost and control theories. Descriptive research design was employed. The study targeted 50 venture capital firms operating in Kenya during the period (2014-2019) as per Kenya treasury report (2019) and EAVCA (2019). A census of the fifty venture capital firms was utilized in the study. Self-administered questionnaires were used to collect primary data from venture capital firms fund managers. Secondary data on financials was collected using a data collection sheet. The study had a response rate of 93% of the target population. Multiple regression analysis was used to analyze collected data with the help of SPSS computer package. Means and percentages were also used. Analyzed data was presented in form multiple regression equation and tables of regression coefficients. The study found out that staging of capital positively affects financial performance of venture capital firms in Kenya. The study found out that return on investment is highest on late stage, followed by growth stage and early stage financing in that order. Finding from this study would help venture capital investors make informed decision when using stage financing as a financing option in their investment. Policy maker will use findings of this study to develop policy to ensure venture capital industry growth and especially staged financing. In additions findings from this study will add to existing literature and elicit the urge for further studies on venture capital industry from scholars and academicians. The study recommend that venture capital firms should stage their financing with more of the investment in late, growth and early stage in that order to enhance return on investment. Further research can be done on effect of stage capital financing on exit strategies adopted by venture capital firms in Kenya. In addition, a study on effect of staged capital financing on financial of venture capital backed SMEs in Kenya can be done.en_US
dc.description.sponsorshipKenyatta Universityen_US
dc.identifier.urihttp://ir-library.ku.ac.ke/handle/123456789/22953
dc.language.isoenen_US
dc.publisherKenya University
dc.subjectStaged Capitalen_US
dc.subjectFinancial Performanceen_US
dc.subjectVenture Capital Firmsen_US
dc.subjectKenyaen_US
dc.titleStaged Capital and Financial Performance of Venture Capital Firms in Kenyaen_US
dc.typeThesisen_US
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