Persistence Pays: Evidence from Investment Style Dynamics in the Venture Capital Industry

59 Pages Posted: 29 Jun 2013

See all articles by Amit Bubna

Amit Bubna

Indian School of Business

Sanjiv Ranjan Das

Santa Clara University - Leavey School of Business

Paul Hanouna

Villanova University - School of Business

Date Written: June 20, 2013

Abstract

We examine style drift in venture capital investing using 344,491 VC firm-financing rounds between 1980 and 2010. We locate each VC financing round in one of twenty styles, and develop a measure of a change in a VC's styles ("style drift") that is time consistent and independent of firm size. VC firms that exhibit style persistence outperform those that drift. VCs in the early years of their lifecycle exhibit greater style drift. Style drift hurts performance for seasoned VCs and for VCs that drift in a correlated (herd) fashion with other VC firms. We fi nd evidence for economies of style persistence.

Keywords: Venture capital, style persistence, style drift

JEL Classification: G20, G24

Suggested Citation

Bubna, Amit and Das, Sanjiv Ranjan and Hanouna, Paul E., Persistence Pays: Evidence from Investment Style Dynamics in the Venture Capital Industry (June 20, 2013). Available at SSRN: https://ssrn.com/abstract=2286213 or http://dx.doi.org/10.2139/ssrn.2286213

Amit Bubna (Contact Author)

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Sanjiv Ranjan Das

Santa Clara University - Leavey School of Business ( email )

Department of Finance
316M Lucas Hall
Santa Clara, CA 95053
United States

HOME PAGE: http://algo.scu.edu/~sanjivdas/

Paul E. Hanouna

Villanova University - School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States

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