Transferable Skills? Founders as Venture Capitalists / Paul A. Gompers, Vladimir Mukharlyamov.

Format:

Book

Author/Creator:

Gompers, Paul A.

Contributor:

National Bureau of Economic Research.

Mukharlyamov, Vladimir.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29907.

NBER working paper series no. w29907

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

In this paper we explore whether or not the experience as a founder of a venture capital-backed startup influences the performance of founders who become venture capitalists (VCs). We find that nearly 7% of VCs were previously founders of a venture-backed startup. Having a successful exit and being male and white increase the probability that a founder transitions into a venture capital career. Successful founder-VCs have investment success rates that are 6.5 percentage points higher than professional VCs while unsuccessful founder-VCs have investment success rates that are 4 percentage points lower than professional VCs. While successful founder-VCs do get higher quality deal flow than professional or unsuccessful founder-VCs, observably higher deal quality does not explain the entire difference in performance. Using an instrumental variables approach to separate unobservable deal quality from value-add, we find that the outperformance of successful founder-VCs is consistent with them adding more value post-investment.

Notes:

Print version record

April 2022.