Venture Capital Investment Strategies Under Financing Constraints: Evidence from the 2008 Financial Crisis

Employing the 2008 financial crisis as an empirical setting, we examine the investment strategies of venture capitalists (VCs) in response to liquidity supply shocks. While predictably VCs reduce investment, our difference-in-differences approach demonstrates that VCs reposition by increasing their share of, and per-round funding to, startups operating in the VCs’ core sectors. These effects are driven by more-experienced VCs, and are strongest...