Abstract

http://ssrn.com/abstract=1568131
 
 

References (41)



 
 

Citations (5)



 


 



How Do Venture Capital Partners Match with Startup Founders?


Ola Bengtsson


Lund University School of Economics and Management; Research Institute of Industrial Economics (IFN)

David H. Hsu


University of Pennsylvania - Management Department

March 10, 2010


Abstract:     
The venture capital market is characterized by personal interactions between VC firms and the startups they finance. Yet we have little systematic evidence of how startup founders get matched with partners at VC firms. By assembling data at the individual partner and founder level, we compare personal similarity-based rationale with resource complementarity-based reasons explaining the likelihood of an investment match. We find that a match is more likely if the two parties share a common ethnicity or have both attended a top ranked university, and particularly so when information problems are more severe. With such similarities, the VC’s investment also represents a larger fraction of her total investments. We interpret personal similarity as reducing transactions costs in VC matching rather than proxying quality-based matching. Matching based on VC partner’s professional expertise appears to be less determined by their complementarity with the founder’s background and more by the current lifecycle stage of the startup. In particular, VC partners with finance or operational capabilities are more likely to match with mature ventures. Our findings shed new light on how personal characteristics and professional expertise can be important in financing situations where informational frictions are severe and investors are actively involved with their borrowers.

Number of Pages in PDF File: 31

Keywords: venture capital, startups, matching

JEL Classification: G24, M13

working papers series





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Date posted: March 11, 2010  

Suggested Citation

Bengtsson, Ola and Hsu, David H., How Do Venture Capital Partners Match with Startup Founders? (March 10, 2010). Available at SSRN: http://ssrn.com/abstract=1568131 or http://dx.doi.org/10.2139/ssrn.1568131

Contact Information

Ola Bengtsson
Lund University School of Economics and Management ( email )
P.O Box 7080
Lund
Sweden
HOME PAGE: http://www.olabengtsson.com
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
David H. Hsu (Contact Author)
University of Pennsylvania - Management Department ( email )
The Wharton School
Philadelphia, PA 19104-6370
United States
215-746-0125 (Phone)
215-898-0401 (Fax)

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