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 2020
  • Article
  • Journal of Financial Economics

How Do Venture Capitalists Make Decisions?

By: Paul A. Gompers, William Gornall, Steven N. Kaplan and Ilya A. Strebulaev
  • Format:Print
ShareBar

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

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.
  • Find it at Harvard

About The Author

Paul A. Gompers

Entrepreneurial Management
→More Publications

More from the Authors

    • March 2025
    • Faculty Research

    Mobvoi's Path Through Market Challenges and Business Reinvention

    By: Paul A. Gompers and Shu Lin
    • March 14, 2025
    • Harvard Crimson

    Harvard Students Should Ignore Calls to Boycott Israel Trek

    By: Jesse M. Fried, Paul A. Gompers, Scott Kominers and Mark C. Poznansky
    • November 2024
    • Faculty Research

    Grab Returns: Riding the SPAC-tacular Highway?

    By: Paul Gompers, Graham Blanks and Sachin Srivastava
More from the Authors
  • Mobvoi's Path Through Market Challenges and Business Reinvention By: Paul A. Gompers and Shu Lin
  • Harvard Students Should Ignore Calls to Boycott Israel Trek By: Jesse M. Fried, Paul A. Gompers, Scott Kominers and Mark C. Poznansky
  • Grab Returns: Riding the SPAC-tacular Highway? By: Paul Gompers, Graham Blanks and Sachin Srivastava
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.