“How Do Venture Capitalists Make Decisions?”by Paul Gompers, William Gornall, Steven N. Kaplan, Ilya A. Strebulaev

There is a new NBER working paper out which could be of interest to those working on venture capital and entrepreneurial finance. Abstract: 

We survey 889 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 2016).

Full paper here.

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