Deriving successful venture capital deal profile through decision tree analysis in Indian context

Abstract

Purpose

This study is based on the development of predictive classification for the success of a venture capital (VC) deal derived from both qualitative and quantitative indicators.

Design/methodology/approach

Decision tree analysis has used for devising the success model of VC deal. Various deal characteristics are considered in this study as the observable component of success.

Findings

The finding of this analysis indicates that the success of the deal does not only depend on the final outcome like post company valuation (POST_COMP), realised revenue (RREV) but also depends on various observable contractual characteristics like syndication, use of convertible security and ownership percentage with some noticeable deal features.

Practical implications

This study increases the further scope of study on a contractual mechanisms such as allocation of cash flow right and control right in the deal contract between venture investor and entrepreneur firm. This could give a better understanding of success path of a venture deal.

Originality/value

This study has attempted to derive a performance model based on observable attributes of a VC deal.

Citation

Mishra, S. and Bag, D. (2020), "Deriving successful venture capital deal profile through decision tree analysis in Indian context", World Journal of Entrepreneurship, Management and Sustainable Development, Vol. 16 No. 2, pp. 97-108. https://doi.org/10.1108/WJEMSD-03-2018-0031