October 4th: Emmanuel Yimfor
Startup Experience, Venture Capital Experience, and First-time Venture Fund Performance, by David Brophy, Shane Miller, Emmanuel Yimfor (University of Michigan) [pdf]
We study the sources of cross-sectional variation in the performance of first-time venture capital (VC) fund partners. We find that, relative to partners with startup experience, partners with VC experience are at least 20 percent more likely to invest in successful deals or start a follow-on fund. We investigate three potential mechanisms for this finding. Our tests do not support the hypotheses that partners with VC experience make riskier investments or have better deal-selection skills. Consistent with a network effect, we show that the higher success rate for partners with VC experience primarily comes from joining successful syndicates, not from leading successful deals. Our results suggest that a background in venture capital is an important channel for the success of first-time venture funds.