Hoan Soo Lee, Business Economics PhD
Thesis Chair: Josh Lerner
Value Access in Venture Capital
Managerial advantages from access to high-quality deals in venture capital investments are identified and measured. Underlying social network of Harvard Business School MBA venture capitalists and entrepreneurs is used to proxy availability of deal access. Random section assignment of HBS MBA graduates provides a key exogenous variation for identification. Being socially connected to peer venture capital firms and private equity seeking startups leads to more deal flow, larger asset under management and better performance in the inaugural funds of HBS-executive run venture capital firms. A fortuitous endowment of one additional section-peer entrepreneur leads to raising $21.09M more, and one additional section-peer venture capitalist leads to raising $7.43M more than the average size of HBS funds. One standard deviation higher section-peer past performance raises the likelihood of IPO exit to 20.79% from its baseline performance of 14.49% in the absence of peer activity. Results suggest that the well-connected venture capitalist may be successful by attaining access to great deals. The effect appears to be persistent in follow-on funds.