Decision dynamics in venture capital investment committees

The goal of the research project is to create increased understanding of the origins, motivations, and potential effects of various decision rules in Swedish venture capital funds.

Venture capital funds provide crucial funding for innovative startups, and early-stage entrepreneurial companies in Sweden raised close to 6 billion SEK in venture capital investment in 2022 alone.

Investment committees are key decision structures for venture capital (VC) funds, where a large portion of investments are (de)selected. It can thus be argued that investment committee decisions are a key factor in VC fund competitive advantage and future performance.

As mapped in a recent survey, Nordic VCs use various decision rules in their investment committees e.g. majority voting, unanimous voting, consensus with veto powers, and individual champions (Söderblom et al., 2023). The distribution of Nordic and European VC decision rules is notably different from previous surveys of US venture capital fund decision rules (Gompers et al., 2020; Malenko et al., 2023).

The goal of the research project is to create increased understanding of the origins, motivations, and potential effects of various decision rules in Swedish VC investment committees through qualitative data collection and interviews with venture capital funds. The research project is done in collaboration with the Swedish Private Equity and Venture Capital Association (SVCA).

References:

Gompers, P. et al., (2020) How do venture capitalists make decisions? Journal of Financial Economics, 135(1), 169-190.

Malenko et al. (2023) Catching Outliers: Committee Voting and the Limits of Consensus when Financing Innovation, Harvard Business School Working Paper 21-131

Söderblom et al. (2023) Practices of European Venture Capitalists, European Venture Capital Association (EVCA), April 2023