Importance of Research in Crafting an Investment Thesis.
Venture Capital vs. Other Paths.
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In How Do Venture Capitalists Make Decisions? (NBER Working Paper 22587), Paul Gompers, William Gornall, Steven N. Kaplan, and Ilya A. Strebulaev report on the results of a survey of 885 institutional venture capitalists (VCs) conducted between November 2015 and March 2016. The survey asked detailed questions covering business practices. Most respondents were graduates of top MBA programs or Kauffman Fellows. Some were recruited from a list of individual members of the National Venture Capital Association and the VentureSource database. Eighty-two percent of respondents were partners in their firms.
The financial crisis of 2008 deeply damaged the credibility of financial innovation in the general public’s mind. As the collapse of markets dried up credit across the system, the notion that securities such as collateralized debt obligations and credit default swaps are enablers of growth suddenly seemed implausible, if not deluded. Indeed, those instruments are often described today as weapons of mass destruction.
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