Optimal Investment and Exit Decision of Venture Capitals With Multiple Heterogeneous Beliefs

Generally, players have different beliefs about a project. We propose a two-stage decision model with multiple heterogeneous beliefs using real options game theory. Based on this model, we analyze the optimal timing and invested capital for venture capital in stage 1, investing, and in stage 2, exiting. The results show that different beliefs will decrease the optimal invested capital but have little influence on the optimal investment timing, which well explains the “agree to disagree” phenomenon. This negative effect can be offset by the learning process but can also be exacerbated by different required returns