Informational Hold-Up and Performance Persistence in Venture Capital

摘要: Why don't successful venture capitalists eliminate excess demand for their follow-on funds by aggressively raising performance fees? We propose a theory of learning that leads to informational hold-up in the VC market. Investors fund learn whether has skill or was lucky, whereas potential outside investors only observe returns. This gives VC's current power when raises his next fund: Without backing, he cannot persuade anyone else him, since would interpret lack backing as sign is low. diminishes ability increase fees line with performance. The model provides rationale persistence after-fee returns documented Kaplan and Schoar (2005) predicts low expected among first-time funds, from fund, over-subscription raised VCs. Empirical evidence large sample U.S. between 1980 2006 consistent these predictions.