Running with the Big Dogs : The Influence of a High-Reputation Venture Capital Investor on the Decision to Invest In a New Industry

How does the influence of other well-known venture capital firms influence investment decision-making? While a great deal has been written about the venture capital decision process, in particular the criteria employed by venture investors when evaluating potential deals, we know much less about the role that contextual factors play in early-stage investment decision-making. This study departs from previous work on venture capitalist decision-making that focuses on deal criteria, examining instead how investors incorporate the actions of other actors-in this case, well-known venture capital firms-when making investment decisions. We draw on insights from the marketing, cognitions, and venture capital literature along with data from a conjoint experiment completed with 176 professional venture capital investors to explore the influence of "brand name" venture capitalists on the decisions made by other venture capitalists. Our results reveal the significant influence that prestigious venture capital firms have on investment decision-making. Implications for theory and practice are addressed.