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  • Working Paper

How Do Venture Capitalists Make Decisions?

By: Paul A. Gompers, William Gornall, Steven N. Kaplan and Ilya A. Strebulaev
  • Format:Print
  • | Language:English
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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).

Keywords

Venture Capital; Decision Choices and Conditions

Citation

Gompers, Paul A., William Gornall, Steven N. Kaplan, and Ilya A. Strebulaev. "How Do Venture Capitalists Make Decisions?" NBER Working Paper Series, No. 22587, September 2016.
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About The Author

Paul A. Gompers

Entrepreneurial Management
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Related Work

    • January 2020
    • Journal of Financial Economics

    How Do Venture Capitalists Make Decisions?

    By: Paul A. Gompers, William Gornall, Steven N. Kaplan and Ilya A. Strebulaev
Related Work
  • How Do Venture Capitalists Make Decisions? By: Paul A. Gompers, William Gornall, Steven N. Kaplan and Ilya A. Strebulaev
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