Abstract
Style Drift: An Analysis of Venture Investing We examine style drift in venture capital investing using 344,491 VC firm-financing rounds between 1980 and 2010. We locate each VC financing round in one of twenty styles, and develop a measure of a change in VC’s styles (“style drift”) that is time consistent and independent of firm size. VC firms that exhibit style persistence outperform those that drift. VCs in the early years of their lifecycle exhibit greater style drift. Style drift hurts performance for seasoned VCs and for VCs that drift in a correlated (herd) fashion with other VC firms. We find evidence for economies of style persistence. JEL classification: G20, G24
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