Syndicated venture capital portfolio companies selection: a fuzzy inference system – agent-based approach

Abstract

Venture capital is a unique source of funding for innovative firms because they have limited access to traditional capital markets. Regarding VCF’s point of view, start-up portfolio selection and VCF’ syndication have always been critical challenges. Hence, using integrated quantitative methods to get the best-known solutions is always being felt. In this paper, start-up portfolio selection is simulated which is more similar to real-world problems rather than other research. Regarding this goal, preferences of start-ups and their interaction with investors are considered. Concerning the complexity of the problem, the best-known model to simulate this problem is an agent-based model with fuzzy inference system core as a computational engine and also the problem optimization is done using a harmony search algorithm. By this procedure, not only the portfolio’s ROI is maximized but also VCF’ syndication and their share is determined. Finally, several numerical illustrations are implemented and comparisons are performed.

KEYWORDS:

• Venture capital
• agent-based modelling
• harmony search
• start-up portfolio optimization
• fuzzy inference system

AMS SUBJECT CLASSIFICATIONS:

• 68T05
• 68Q32

Disclosure statement

No potential conflict of interest was reported by the author(s).