How Do Venture Capitalists Make Decisions?

Paul Gompers, William Gornall, Steven Kaplan () and Ilya Strebulaev ()

No 22587, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We survey 885 institutional venture capitalists (VCs) at 681 firms to learn how they make decisions across eight areas: deal sourcing; investment selection; valuation; deal structure; post-investment value-added; exits; internal firm organization; and relationships with limited partners. In selecting investments, VCs see the management team as more important than business related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business. While deal sourcing, deal selection, and post-investment value-added all contribute to value creation, the VCs rate deal selection as the most important of the three. We also explore (and find) differences in practices across industry, stage, geography and past success. We compare our results to those for CFOs (Graham and Harvey 2001) and private equity investors (Gompers, Kaplan and Mukharlyamov forthcoming).

JEL-codes: G24 G3 L26 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-pay, nep-sbm and nep-sog
Note: CF
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Citations: View citations in EconPapers (35)

Published as Paul A. Gompers & Will Gornall & Steven N. Kaplan & Ilya A. Strebulaev, 2019. "How Do Venture Capitalists Make Decisions?," Journal of Financial Economics, .

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Journal Article: How do venture capitalists make decisions? (2020)
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