Working Paper: NBER ID: w12592
Authors: Paul Gompers; Anna Kovner; Josh Lerner; David Scharfstein
Abstract: This paper argues that a large component of success in entrepreneurship and venture capital can be attributed to skill. We show that entrepreneurs with a track record of success are more likely to succeed than first time entrepreneurs and those who have previously failed. Funding by more experienced venture capital firms enhances the chance of success, but only for entrepreneurs without a successful track record. Similarly, more experienced venture capitalists are able to identify and invest in first time entrepreneurs who are more likely to become serial entrepreneurs. Investments by venture capitalists in successful serial entrepreneurs generate higher returns for their venture capital investors. This finding provides further support for the role of skill in both entrepreneurship and venture capital.
Keywords: Entrepreneurship; Venture Capital; Skill; Luck; Serial Entrepreneurs
JEL Codes: G24; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Prior success (C52) | Future success (L25) |
| Prior success (C52) | Chance of success for first-time entrepreneurs (L26) |
| Prior success (C52) | Chance of success for previously failed entrepreneurs (L26) |
| Experience of venture capital firms (G24) | Identification of high-quality entrepreneurs (L26) |
| Successful track record (C52) | Funding at earlier stages (I22) |
| Skill (J24) | Success in entrepreneurship (L26) |