Kanniainen, VesaVesaKanniainenKeuschnigg, ChristianChristianKeuschnigg2023-04-132023-04-132004-08-01https://www.alexandria.unisg.ch/handle/20.500.14171/6757110.1016/j.jbankfin.2003.07.005Venture capitalists, representing informed capital, screen, monitor and advise start-up entrepreneurs. The paper reports three new results on venture capital (VC) finance and the evolution of the VC industry. First, there is an optimal VC portfolio size with a trade-off between the number of companies and the value of managerial advice. Second, advice tends to be diluted when the industry expands and VC skills remain scarce in the short-run. The delayed entry of experienced VCs eventually restores the quality of advice and leads to more focused company portfolios. Third, as a welfare result, VCs tend to provide too little advisory effort and to invest in too few companies. Testable implications are also discussed.enVenture capitalcompany portfoliomanagerial adviceeconomic rents.journal article