The Effect of Venture Capitalists Straying from Their Industry Comfort Zones

57 Pages Posted: 17 Apr 2018

See all articles by Tyler Hull

Tyler Hull

University of Massachusetts Boston

Date Written: March 20, 2018

Abstract

I analyze the effect of venture capitalist's exit performance for investments made outside of a venture capitalist's preferred investment industry. I find that venture backed investments are significantly more likely to have successful exits when the backing venture capitalists makes an investment in a firm within their preferred investment industry. Co-investing with another venture capitalist that has the same investment focus as the investment firm partially mitigates this effect. Furthermore, the negative effect is shown to be more pronounced the greater the degree of difference between the venture capital's preferred investment industry and the investment industry.

Keywords: venture capital, style drift, speicalization

JEL Classification: G24

Suggested Citation

Hull, Tyler, The Effect of Venture Capitalists Straying from Their Industry Comfort Zones (March 20, 2018). 2nd Emerging Trends in Entrepreneurial Finance Conference. Available at SSRN: https://ssrn.com/abstract=3163955 or http://dx.doi.org/10.2139/ssrn.3163955

Tyler Hull (Contact Author)

University of Massachusetts Boston ( email )

100 William T Morrissey Blvd
Boston, MA 02125
United States

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