How Do Venture Capitalists Make Decisions?

We survey 889 institutional venture capitalists (VCs) at 681 rms to learn how they make decisions across eight areas: deal sourcing; investment selection; valuation; deal structure; postinvestment value-added; exits; internal rm organization; and relationships with limited partners. In selecting investments, VCs see the management team as more important than business related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business. While deal sourcing, deal selection, and post-investment value-added all contribute to value creation, the VCs rate deal selection as the most important of the three. We also explore (and nd) dierences in practices across industry, stage, geography and past success. We compare our results to those for CFOs (Graham and Harvey 2001) and private equity investors (Gompers, Kaplan and Mukharlyamov forthcoming).