Publication
Research Summary: This article investigates venture capital (VC) decision-making, a process that occurs under changing conditions and limited, ambiguous information. We shed new light on the inherent dynamics of this strategic process. One of the key distinguishing features of our study is its unprecedented access to the internal decision-making process of a VC firm. By analyzing unique, longitudinal data capturing 2,383 proposal selection processes conducted over the life of one venture capital fund, we show how decision-making speed and the information cues that decision makers rely upon will, over time, change in systematic and predictable ways. Specifically, our approach allows us to identify fundamental, unexplored patterns with respect to the selection process as a whole and the multiple stages within the process.Managerial Summary: Each year venture capitalists receive hundreds of investment proposals, but is every proposal received by a venture capitalist processed equally? In this study, we show how the source of a proposal and the available amount of investment capital, factors that are not contained within the pages of a proposal, may influence the investment decision-making process. Our results highlight the impact of being referred to a venture capitalist by a trusted source, as more time is spent evaluating these proposals and they proceed further along in the process. We also find that venture capitalists process proposals more quickly as the capital in the fund is invested over the life of the fund.