VC Investment Decisions: Hunches, Metrics, or Coin Flips?

Sammanfattning: Venture capitalists (VCs) face a complex decision-making process when selecting startups to invest in. This qualitative single case study aims to highlight the factors VCs take into account and how their decisions vary depending on the investment area and startup stage, where previous research has yielded conflicting conclusions. By exploring the concepts of information asymmetry and path dependence, this study uncovers the vital role of founder quality as a critical factor for all VCs. Founder quality serves as a "must-have" attribute that helps bridge the information asymmetry gap between VCs and startups. However, the assessment of founder quality can be influenced by path dependence, as VCs may exhibit a bias towards founders with similar personalities, potentially overshadowing other critical aspects of the investment. As the startup progresses from the early stage to growth and late stage, VCs shift their focus toward financial metrics, reflecting the need for established companies to generate returns and maintain financial stability. Additionally, VCs consider tailored metrics specific to their investment area, allowing for more precise decision-making. Weaknesses of the study include the fundraising environment and future research is suggested to complement this by performing a similar study over a larger time period.