Changing of VC funds' investment pattern in times of financial turmoil. The case of Swedish VC funds in the 2005-2012 period.

Abstract: The Venture Capital (VC) industry is of major importance for economic growth,since in some cases VC is the best option for start-ups and \young companies" tosecure funding to grow. Studying and understanding VCs behavior is importantnot only from an academic viewpoint, but also for rms seeking investment, thefunds investing in VC as an asset class, and VC funds themselves. Despitethe fact that VC industry remains in a state of continuous change, and VC'sare reluctant to share internal information on internal operations and decisionmaking, this study has explored a way to analyze VC's investments and trackchanges in their behavior over time.This master thesis tries to answer the main research question: \Have SwedishVC funds changed their behavior in the period before, during, and after the2008 nancial crisis?" We selected the following criteria as indicators of VCbehavior - the number of investments, sector preferences, amount invested, stagepreferences, and syndication with other funds. The auxiliary research questionlinks the change in the VC funds behavior to the main economic trend bycomparing investment patterns to general economic indicators. This masterthesis is unique, since nothing completely similar was done before.The analysis section consists of: information collation, statistics, trend analysis,and qualitative research. This research is limited to the venture funds,whose target market includes Sweden.The analysis showed that the number of investments stayed the same, whilethe invested amount decreased in 2009, nevertheless, both these indicators increasedin 2011. During the period 2007-2012, the preferred stage of investmentshifted to include growth equity and seed companies along with early stagesrms and start-ups. VC funds have preferred to diversify their portfolio amongdierent sectors, and to syndicate more during the 2008 crisis.Addressing the main question above, yes - the venture funds' behavior didchange during the period 2005-2012. The examination of this pattern has indicatedthat the funds' change corresponds to the main economic trend with aone-year delay.Keywords: the 2008 nancial crisis, crisis, VC funds' behavior, 2006-2012,preferable sector, preferable stage, investments number, amount invested, VCfunds, behavior change, Swedish economic trend, Economic Tendency Indicator,Sweden, Nordic, investments trend, invested amount trend.