LPs Investment Decision In Venture Capital:Fund Size, Performance And GPs

The aim of this thesis is to analyze the impact of Fund Size, General Partners team composition and behavior on fund performance in Venture Capital. The study is performed from a Limited Partners perspective, underlying the need of sector, stage and vintage year diversification of Fund of Venture Capital Funds. The dissertation underlines how these variables can influence Limited Partners investment decisions and it focuses on U.S. Early Stage Funds investing in digital/tech companies. The research helps Limited Partners to select the best portfolio of venture funds and fund managers to implement a fundraising strategy coherent with LPs’needs. First, I compared returns of funds smaller than $200 M with larger funds, discovering a significant gap in terms of Total Value Paid In:smaller funds perform better than large funds. Second, I found a negative correlation between size and performance, supported by the lack of performance persistence when VC firms increase the size of their next funds. Finally, I provided evidences that Limited Partners can reduce risk and increase returns building long-term relationships with VC firms with several small funds managed by small teams of decision makers.