How Do Venture Capitalists Make Decisions?

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

}
//]]>
</script>
<input type="hidden" name="__VIEWSTATEGENERATOR" id="__VIEWSTATEGENERATOR" value="E39AC016" />
<script type="text/javascript">RegisterSod("sp.core.js", "\u002f_layouts\u002fsp.core.js?rev=7ByNlH\u00252BvcgRJg\u00252BRCctdC0w\u00253D\u00253D");</script><script type="text/javascript">RegisterSod("sp.res.resx", "\u002f_layouts\u002fScriptResx.ashx?culture=en\u00252Dus\u0026name=SP\u00252ERes\u0026rev=b6\u00252FcRx1a6orhAQ\u00252FcF\u00252B0ytQ\u00253D\u00253D");</script><script type="text/javascript">RegisterSod("sp.ui.dialog.js", "\u002f_layouts\u002fsp.ui.dialog.js?rev=Tpcmo1\u00252FSu6R0yewHowDl5g\u00253D\u00253D");RegisterSodDep("sp.ui.dialog.js", "sp.core.js");RegisterSodDep("sp.ui.dialog.js", "sp.res.resx");</script><script type="text/javascript">RegisterSod("core.js", "\u002f_layouts\u002f1033\u002fcore.js?rev=Emb5hNX1RZMNXk9oS82yvA\u00253D\u00253D");</script>
<script type="text/javascript">
//<![CDATA[
var _spFormDigestRefreshInterval = 1440000;window.g_updateFormDigestPageLoaded = new Date(); window.g_updateFormDigestPageLoaded.setDate(window.g_updateFormDigestPageLoaded.getDate() -5);function loadMDN2() { EnsureScript('MDN.js', typeof(loadFilterFn), null); }
function loadMDN1() { ExecuteOrDelayUntilScriptLoaded(loadMDN2, 'sp.ribbon.js'); }
_spBodyOnLoadFunctionNames.push('loadMDN1');//]]>
</script>
<script type="text/javascript">RegisterSod("sp.runtime.js", "\u002f_layouts\u002fsp.runtime.js?rev=IGffcZfunndj0247nOxKVg\u00253D\u00253D");RegisterSodDep("sp.runtime.js", "sp.core.js");RegisterSodDep("sp.runtime.js", "sp.res.resx");</script><script type="text/javascript">RegisterSod("sp.js", "\u002f_layouts\u002fsp.js?rev=\u00252B4ZEyA892P3T0504qi0paw\u00253D\u00253D");RegisterSodDep("sp.js", "sp.core.js");RegisterSodDep("sp.js", "sp.runtime.js");RegisterSodDep("sp.js", "sp.ui.dialog.js");RegisterSodDep("sp.js", "sp.res.resx");</script><script type="text/javascript">RegisterSod("cui.js", "\u002f_layouts\u002fcui.js?rev=OOyJv78CADNBeet\u00252FvTvniQ\u00253D\u00253D");</script><script type="text/javascript">RegisterSod("inplview", "\u002f_layouts\u002finplview.js?rev=WB6Gy8a027aeNCq7koVCUg\u00253D\u00253D");RegisterSodDep("inplview", "core.js");RegisterSodDep("inplview", "sp.js");</script><script type="text/javascript">RegisterSod("ribbon", "\u002f_layouts\u002fsp.ribbon.js?rev=F\u00252BUEJ66rbXzSvpf7nN69wQ\u00253D\u00253D");RegisterSodDep("ribbon", "core.js");RegisterSodDep("ribbon", "sp.core.js");RegisterSodDep("ribbon", "sp.js");RegisterSodDep("ribbon", "cui.js");RegisterSodDep("ribbon", "sp.res.resx");RegisterSodDep("ribbon", "sp.runtime.js");RegisterSodDep("ribbon", "inplview");</script><script type="text/javascript">RegisterSod("sp.ui.policy.resources.resx", "\u002f_layouts\u002fScriptResx.ashx?culture=en\u00252Dus\u0026name=SP\u00252EUI\u00252EPolicy\u00252EResources\u0026rev=YhBHGmUAGyJ3lAgSdE4V\u00252Fw\u00253D\u00253D");</script><script type="text/javascript">RegisterSod("mdn.js", "\u002f_layouts\u002fmdn.js?rev=gwmFFJ2\u00252FfFacqXWAqG\u00252FqKg\u00253D\u00253D");RegisterSodDep("mdn.js", "sp.core.js");RegisterSodDep("mdn.js", "sp.runtime.js");RegisterSodDep("mdn.js", "sp.js");RegisterSodDep("mdn.js", "cui.js");RegisterSodDep("mdn.js", "ribbon");RegisterSodDep("mdn.js", "sp.ui.policy.resources.resx");</script>
<script type="text/javascript">
//<![CDATA[

function _spNavigateHierarchyEx(nodeDiv, dataSourceId, dataPath, url, listInContext, type, additionalQString) {
    SetAdditionalNavigateHierarchyQString(additionalQString);
    g_originalSPNavigateFunc(nodeDiv, dataSourceId, dataPath, url, listInContext, type);
}

g_originalSPNavigateFunc = _spNavigateHierarchy;
_spNavigateHierarchy = _spNavigateHierarchyEx;
var _fV4UI = true;//]]>
</script>
<script type="text/javascript">RegisterSod("msstring.js", "\u002f_layouts\u002f1033\u002fmsstring.js?rev=QtiIcPH3HV7LgVSO7vONFg\u00253D\u00253D");</script><script type="text/javascript">RegisterSod("browserScript", "\u002f_layouts\u002f1033\u002fnon_ie.js?rev=EVTj1bu32\u00252FMla6SDN\u00252FsNTA\u00253D\u00253D");</script>
<script type="text/javascript">
//<![CDATA[
var __wpmExportWarning='This Web Part Page has been personalized. As a result, one or more Web Part properties may contain confidential information. Make sure the properties contain information that is safe for others to read. After exporting this Web Part, view properties in the Web Part description file (.WebPart) by using a text editor such as Microsoft Notepad.';var __wpmCloseProviderWarning='You are about to close this Web Part.  It is currently providing data to other Web Parts, and these connections will be deleted if this Web Part is closed.  To close this Web Part, click OK.  To keep this Web Part, click Cancel.';var __wpmDeleteWarning='You are about to permanently delete this Web Part.  Are you sure you want to do this?  To delete this Web Part, click OK.  To keep this Web Part, click Cancel.';//]]>
</script>
</form>

Go to main content

Article | Journal of Financial Economics | January 2020

How Do Venture Capitalists Make Decisions?

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

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; Value Creation; Capital Structure; Entrepreneurship; Decision Making;

Format: Print

Find at Harvard

Citation:

Gompers, Paul A., William Gornall, Steven N. Kaplan, and Ilya A. Strebulaev. "How Do Venture Capitalists Make Decisions?" Journal of Financial Economics 135, no. 1 (January 2020): 169–190.

About the Author

Paul A. Gompers

Eugene Holman Professor of Business Administration

Finance

Entrepreneurial Management

View Profile »
View Publications »

Faculty & Research

How Do Venture Capitalists Make Decisions?

Abstract

Citation:

About the Author

More from the Author