Paper: Irreplaceable Venture Capitalists

Abstract: We provide casual evidence on how individual venture capitalista (VCs) add value to startups, using exogenous deaths of VC directors on startup boards. Losing a VC director increases the probability of startup failure, delays a successful exit, and reduces the IPO likelihood. Affected startups that raise capital after a diretor loss obtain a narrower investor base. These effects persist after the replacement of deceased VCs, indicating the importance of the original deal experts for startup survival, financing, and going public. In contrast, losing a VC director does not affect recruitment, product development and CEO replacement, suggesting that these skills are replicable. Overall, a VC's network and reputation are key irreplaceable assets.