Evaluating Venture Technical Competence in Venture Capitalist Investment Decisions

• 成果类型: Article
• 署名作者: Aggarwal, Rohit; Kryscynski, David; Singh, Harpreet
• 署名单位: Utah System of Higher Education; University of Utah; Brigham Young University; University of Texas System; University of Texas Dallas
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2014.2117
• 发表日期: 2015
• 页码: 2685-2706
• 关键词: econometrics; VC funding; technical competence; VC assessment

摘要

Although much research emphasizes the importance of venture technical competence for venture success and, therefore, the importance of venture technical competence in venture capitalist (VC) investment decisions, we know little about why some VCs may be better than others at assessing the technical competence of ventures. We gathered unique and proprietary data from 33 VCs and 308 ventures that sought Series A funding from those VCs. We show that VC assessment of ventures predicts VC investment, and venture technical competence predicts subsequent venture failure. This means that VCs that overassess ventures are more likely to invest in firms that are more likely to fail. We then show that higher VC technical competence leads to lower errors in assessment, but that greater similarity between the VC and venture in technical competence leads to higher assessments, ceteris paribus. We thus conclude that VC competence enhances the accuracy of VC assessments, but similarity in technical competence between VCs and ventures may lead to positive assessment bias.