Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • January 2008
  • Article
  • Journal of Financial Economics

Venture Capital Investment Cycles: The Impact of Public Markets

By: Paul Gompers, Anna Kovner, Josh Lerner and David Scharfstein
  • Format:Print
  • | Pages:23
ShareBar

Abstract

It is well documented that the venture capital industry is highly volatile and that much of this volatility is associated with shifting valuations and activity in public equity markets. This paper examines how changes in public market signals affected venture capital investing between 1975 and 1998. We find that venture capitalists with the most industry experience increase their investments the most when public market signals become more favorable. Their reaction to an increase is greater than the reaction of venture capital organizations with relatively little industry experience and those with considerable experience but in other industries. The increase in investment rates does not affect the success of these transactions adversely to a significant extent. These findings are consistent with the view that venture capitalists rationally respond to attractive investment opportunities signaled by public market shifts.

Keywords

Market Cycles; Venture Capital; Investment; Experience and Expertise; Public Equity; Volatility; Financial Services Industry

Citation

Gompers, Paul, Anna Kovner, Josh Lerner, and David Scharfstein. "Venture Capital Investment Cycles: The Impact of Public Markets." Journal of Financial Economics 87, no. 1 (January 2008): 1–23. (Earlier versions distributed as National Bureau of Economic Research Working Paper No. 11385.)
  • Find it at Harvard
  • Read Now

About The Authors

Paul A. Gompers

Entrepreneurial Management
→More Publications

Josh Lerner

Entrepreneurial Management
→More Publications

David S. Scharfstein

Finance
→More Publications

More from the Authors

    • May 2025
    • Quarterly Journal of Economics

    The Diffusion of New Technologies

    By: Aakash Kalyani, Marcela Carvalho, Nicholas Bloom, Tarek Hassan, Josh Lerner and Ahmed Tahoun
    • March 2025
    • Faculty Research

    Mobvoi's Path Through Market Challenges and Business Reinvention

    By: Paul A. Gompers and Shu Lin
    • 2025
    • Faculty Research

    Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation

    By: Kyle Herkenhoff, Josh Lerner, Gordon M. Phillips, Francisca Rebelo and Benjamin Sampson
More from the Authors
  • The Diffusion of New Technologies By: Aakash Kalyani, Marcela Carvalho, Nicholas Bloom, Tarek Hassan, Josh Lerner and Ahmed Tahoun
  • Mobvoi's Path Through Market Challenges and Business Reinvention By: Paul A. Gompers and Shu Lin
  • Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation By: Kyle Herkenhoff, Josh Lerner, Gordon M. Phillips, Francisca Rebelo and Benjamin Sampson
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College.