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Evaluating Selection Bias in Early-Stage Investment Returns

Published online by Cambridge University Press:  08 September 2025

Katja Kisseleva Open the ORCID record for Katja Kisseleva [Opens in a new window] ,
Aksel Mjøs  and
David T. Robinson
Katja Kisseleva
Affiliation:
Frankfurt School of Finance & Management k.kisseleva@fs.de
Aksel Mjøs
Affiliation:
Norwegian School of Economics aksel.mjos@nhh.no
David T. Robinson*
Affiliation:
Duke University Fuqua School of Business and NBER
*
davidr@duke.edu (corresponding author)
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Abstract

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This article investigates sample selection bias in early-stage investment. We use comprehensive administrative data on the universe of new firm starts in Norway, allowing us to compare venture-backed firms with ex ante similar firms that do not receive venture funding. The valuation premium for venture backing is sizeable at firm birth and doubles over the first 5 years, implying a substantial upward bias in venture capital (VC) returns relative to comparable firms. In contrast, the premium for firms receiving multiple rounds of outside equity emerges only after the first year and remains significantly smaller than the VC premium throughout the firm life cycle.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 61 , Issue 2 , March 2026 , pp. 841 - 871
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank Manuel Adelino, Manju Puri, and Morten Sorensen (the referee) for helpful comments. Participants at the 2018 Entrepreneurial Financial Management conference, 2018 Bergen Entrepreneurship and Finance Conference, 2019 Annual Private Capital Conference, 2019 KWC Conference on Entrepreneurial Finance, 2020 American Finance Association Annual Meeting, and 2020 SoCal Private Equity conference provided many helpful comments on an earlier version of this project. We thank the Norwegian tax authority for granting us data access. All errors are our own.

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