It is observed in the field of strategic capacity management that demand for an organisation’s product is most likely to be unmet when its resources are expensive. The venture capital industry is a good example of an industry where resources i.e venture capitalists are expensive. Researchers Suzanne De Treville, Jeffrey S Petty from Lausanne University and Stefan Wager from Stanford University conducted a study on whether capital saved from postponing a hire was compensated by the cost of not having evaluated all interesting deals because of lack of personnel. Using 11 years of archival data from a venture capital firm and applying the risk management tool of extreme value theory, they found out that the value gained out of increasing the number of deals evaluated substantially exceeds the cost of extra personnel.

Title: Economies of Extremes: Lessons from Venture Capital Decision Making

Source: Social Science Research Network

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