IDEAS home Printed from https://ideas.repec.org/p/hbs/wpaper/17-065.html
   My bibliography  Save this paper

The Persistent Effect of Initial Success: Evidence from Venture Capital

Author

Listed:
  • Ramana Nanda

    () (Harvard Business School, Entrepreneurial Management Unit)

  • Sampsa Samila

    () (National University of Singapore)

  • Olav Sorenson

    () (Yale School of Management)

Abstract

We used data on individual investments in the portfolios of venture capital firms to study persistence in their performance. Each additional IPO among a VC's first five investments predicted a 13% higher IPO rate for its subsequent 50 investments. Roughly half of this performance persistence stemmed from investment "styles"?investing in particular regions and industries. We found no evidence of performance persistence stemming from a differential ability to select or govern portfolio companies. Rather, our results suggest that early success in venture investing yields better deal ow in subsequent investments, thereby perpetuating differences in the outcomes of initial investments.

Suggested Citation

  • Ramana Nanda & Sampsa Samila & Olav Sorenson, 2017. "The Persistent Effect of Initial Success: Evidence from Venture Capital," Harvard Business School Working Papers 17-065, Harvard Business School.
  • Handle: RePEc:hbs:wpaper:17-065
    as

    Download full text from publisher

    File URL: http://www.hbs.edu/faculty/pages/download.aspx?name=17-0XX.pdf
    Download Restriction: no

    More about this item

    Keywords

    venture capital; performance; monitoring; selection;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hbs:wpaper:17-065. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Soebagio Notosoehardjo). General contact details of provider: http://edirc.repec.org/data/harbsus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.