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Busy Venture Capitalists and Investment Performance

Published online by Cambridge University Press:  07 April 2025

Rustam Abuzov Open the ORCID record for Rustam Abuzov [Opens in a new window]
Rustam Abuzov*
Affiliation:
University of Virginia Darden School of Business
*
abuzovr@darden.virginia.edu
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Abstract

This paper studies the impact of limited attention on investment decisions by venture capitalists (VCs). I find that startups funded by VCs during VCs’ IPO engagements tend to underperform: These startups are 9% less likely to go public or become acquired and have lower exit multiples. The effects of VCs’ busyness cluster around the active phase of the IPO engagement and are more pronounced in cases of higher workload intensity or higher information asymmetry. Overall, this performance gap induced by attention constraints provides new evidence on VCs’ ability to identify investment opportunities at the initial screening stage.

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Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 60 , Issue 6 , September 2025 , pp. 2753 - 2787
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

I thank an anonymous referee, Ran Duchin (the editor), Shai Bernstein, Alon Brav, Max Couvert, Mike Ewens, Rüdiger Fahlenbrach, Joan Farre-Mensa, Marc Frattaroli, Laurent Frésard, Xavier Giroud, Will Gornall, Christoph Herpfer, Sabrina Howell, Elisabeth Kempf, Katja Kisseleva, Josh Lerner, Marc Lipson, Michelle Lowry, Elena Loutskina, Song Ma, Gregor Matvos, Maurice McCourt, Ramana Nanda, Boris Nikolov, Jay Ritter, David Robinson, Nick Roussanov, Morten Sørensen, Luke Stein, Roberto Steri, Ilya Strebulaev, Geoffrey Tate, Davide Tomio, Ting Xu, David Yermack, Jonathan Zandberg, and conference and seminar participants at BI Oslo, Copenhagen Business School, HEC Lausanne, HKU Business School, IE Business School, Tilburg, University of Amsterdam, University of Geneva, University of Iowa, UVA Darden, VU Amsterdam, Annual Private Capital Conference (Montreux), FMA (New Orleans), KWC Conference on Entrepreneurial Finance, PERC Private Equity Research Symposium (Oxford), and SFS Cavalcade North America 2020 for valuable discussions and comments. Part of this research was written while I visited Stanford GSB. A previous version was titled “The Impact of Venture Capital Screening.” All errors are my own.

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