Skin in the game: General partner capital commitment, investment behavior and venture capital fund performance

This paper examines the impact of general partners' (GPs) own investment (capital commitment) in the venture capital (VC) fund they manage on their investment behavior and fund performance. Using a unique dataset with detailed information on VC fund ownership structure, we find that GPs' capital commitment has an inverted U-shaped relationship with investment speed, investment distance, and industry specialization. GPs' capital commitment is also associated with greater exit success. These effects are more pronounced for VC funds with less monitoring by limited partners (LPs). Findings of this paper shed new light on the governance role of managerial ownership in the VC industry and on the GP-LP relationship.