NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Do Venture Capitalists Make Decisions?

Paul Gompers, William Gornall, Steven N. Kaplan, Ilya A. Strebulaev

NBER Working Paper No. 22587
Issued in September 2016
NBER Program(s):Corporate Finance

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).

download in pdf format
   (365 K)

email paper

A non-technical summary of this paper is available in the December 2016 NBER digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22587

Users who downloaded this paper also downloaded* these:
Du, Pflueger, and Schreger w22592 Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy
Bordo and Sinha w22581 A Lesson from the Great Depression that the Fed Might have Learned: A Comparison of the 1932 Open Market Purchases with Quantitative Easing
Kerr and Mandorff w21597 Social Networks, Ethnicity, and Entrepreneurship
Ozcan and Greenstein w22631 Technological Leadership (de)Concentration: Causes in ICTE
Di Maggio, Kermani, and Palmer w22638 How Quantitative Easing Works: Evidence on the Refinancing Channel
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us