The Value of Privacy and the Choice of Limited Partners by Venture Capitalists

92 Pages Posted: 3 Oct 2022 Last revised: 5 Nov 2024

See all articles by Rustam Abuzov

Rustam Abuzov

University of Virginia - Darden School of Business

Will Gornall

University of British Columbia (UBC) - Division of Finance

Ilya A. Strebulaev

Stanford University - Graduate School of Business; National Bureau of Economic Research

Date Written: September 1, 2022

Abstract

Abstract We study how information disclosure concerns shape the choice of limited partners by venture capitalists (VCs). Late-2002 court rulings prevented public investors from providing confidentiality to investment managers. The best-performing VCs, but not other managers, responded by excluding public investors from their new funds. Lost access reduced public investor returns by $1.6 billion relative to $14 billion of their VC commitments. Access was restored by ensuing legislation that reduced disclosure requirements and by contractual innovations allowing VCs to provide less information to their public investors, with both changes focusing on protecting portfolio company information. 

Keywords: limited partners, FOIA, venture capital, public pensions

JEL Classification: G11, G24, O31

Suggested Citation

Abuzov, Rustam and Gornall, Will and Strebulaev, Ilya A., The Value of Privacy and the Choice of Limited Partners by Venture Capitalists (September 1, 2022). Available at SSRN: https://ssrn.com/abstract=4235337 or http://dx.doi.org/10.2139/ssrn.4235337

Rustam Abuzov (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Will Gornall

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

HOME PAGE: http://willgornall.com

Ilya A. Strebulaev

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

HOME PAGE: http://www.gsb.stanford.edu/faculty-research/faculty/ilya-strebulaev

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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

Paper statistics

Downloads
508
Abstract Views
2,103
Rank
118,833
PlumX Metrics