Abstract
PurposeThis study aims to investigate limited partners’ (LPs) influence on venture capital (VC) fund returns.Design/methodology/approachWe merge data from Preqin and SDC’s VentureXpert spanning from 1993 to 2014 and conduct multiple regression analysis to examine the influence of LPs on VC fund performance. Additionally, we conduct three distinct robustness tests to verify the credibility of our findings.FindingsOur empirical analysis demonstrates that newbie LPs consistently exert a significant positive influence on VC fund returns.Research limitations/implicationsVC and LP data is self-reported, and there is no comprehensive dataset as some LPs prefer to maintain anonymity.Originality/valueExtant literature on LPs’ contribution to VC fund performance is limited. The general assumption is that the role of LPs in VC fund performance is confined to funding. We introduce a new variable, LP track record, as a proxy for LP experience to examine if this variable influences VC performance.
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