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Assets need audiences: How venture capitalists boost valuations by recruiting investors to asset circles

Published online by Cambridge University Press:  09 November 2023

Dave Elder-Vass
Dave Elder-Vass*
Affiliation:
Loughborough University, UK
*
Corresponding author: Dave Elder-Vass, Loughborough University, Ashby Road, Loughborough, LE11 3TU, UK. Email: [email protected].
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Abstract

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Narratives and conventions have received considerable attention in recent discussions of the valuation of financial assets. Narratives and conventions, however, can only be effective to the extent that they attract and persuade audiences, and this article makes the case for paying more attention to those audiences. In particular, the article argues that financial assets can only be established as assets if there is a group of potential investors that has been persuaded to accept them as such: to take them seriously as potential investments. The article coins the term asset circles to refer to such groups and supports the argument with a discussion of venture capital and its role in the production of unicorns: private companies with extraordinary valuations. Venture capital firms may be thought of as value entrepreneurs, and much of the venture capital process is oriented towards constructing both value narratives for the companies they invest in and asset circles prepared to accept those value narratives. Their aim in these processes is a profitable exit, in which the venture capital firm converts its investment back into cash at a considerable profit through either an acquisition or a flotation.

Keywords

Venture capitalvaluationIPOconventionsasset circlesassetisation
Type
Article
Information
Finance and Society , Volume 7 , Issue 1 , 2021 , pp. 1 - 19
Creative Commons
Creative Common License - CCCreative Common License - BYCreative Common License - NCCreative Common License - ND
This is an Open Access article, distributed under the terms of the Creative Commons Attribution-NonCommercial-No Derivatives licence (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits noncommercial re-use, distribution, and reproduction in any medium, provided the original work is unaltered and is properly cited. The written permission of Cambridge University Press must be obtained for commercial re-use or in order to create a derivative work.
Copyright
© 2021 The Author(s)

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