Busy Venture Capitalists and Investment Performance
97 Pages Posted: 19 Mar 2019 Last revised: 26 Dec 2023
Date Written: March 15, 2019
Abstract
While existing studies confirm venture capitalists’ (VCs) monitoring ability, evidence of their screening ability remains inconclusive. To confirm VCs’ screening role, I build on within-individual variation in VC partners’ workload and attention stemming from engagement in their portfolio companies’ IPOs. I find that when VCs are busy and distracted, they tend to make underperforming investments. The effects are stronger in cases of higher workload intensity and higher information asymmetry. These results speak to the importance of screening for generating venture capital returns, and point to the meaningful economic tradeoff between engaging with existing companies and screening of new startups.
Keywords: venture capital, IPO, monitoring, screening, investment performance
JEL Classification: G11, G24, M13, O31
Suggested Citation: Suggested Citation