The Harvard Business School has published a new study on the interplay between diversity and success in venture capital investing in startups.
The more ethnic and educational affinity there is between two venture capitalists investing in a firm, the less likely the firm will succeed. Venture capitalists have a strong tendency to team with other venture capitalists whose ethnic and educational backgrounds are similar.
Two VCs from the same undergraduate school are 34.4 percent more likely to collaborate and increase by 39.2 percent if of the same ethnicity.
The odds of success of an invested company go down 17% if two VCs worked at the same company; -19% if the same undergrad school; -20% if the same ethnicity. The lack of success among similar investors seemed to lie in the decisions that *followed* the investment due to ‘groupthink’.
Side note: Last names of the three researchers who wrote the paper — Gompers, Xuan and Mukharlyamov.
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