Peer Networks in Venture Capital

46 Pages Posted: 14 Dec 2013 Last revised: 8 Jul 2014

See all articles by Hoan Lee

Hoan Lee

Tsinghua University - School of Economics & Management

Date Written: December 10, 2013

Abstract

I identify advantages from peer networks in venture capital (VC) investments, estimating large impacts. I use the unique experiment underlying the formation of Harvard Business School MBA venture capitalists and entrepreneurs for identification. Specifically, random section assignment of HBS MBA graduates provides a key exogenous variation for identification. Being socially connected to peer venture capital firms and private equity seeking startups leads to more deal flow, larger assets under management and better performance in the inaugural funds of HBS-executive run venture capital firms. A fortuitous endowment of one additional section-peer entrepreneur leads to raising $23.47M more, and one additional section-peer venture capitalist leads to raising $10.48M more than the average size of HBS funds. In sum, the results on exogenously endowed connections of VCs suggest a strong and important role of connections in determining the success of any future venture capitalist.

Keywords: Entrepreneurial Finance, Venture Capital, Private Equity, Social Networks

Suggested Citation

Lee, Hoan, Peer Networks in Venture Capital (December 10, 2013). Available at SSRN: https://ssrn.com/abstract=2367122 or http://dx.doi.org/10.2139/ssrn.2367122

Hoan Lee (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

HOME PAGE: http://www.sem.tsinghua.edu.cn/en/hoansoo

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
240
Abstract Views
1,885
rank
156,824
PlumX Metrics