PERC | The Value of Privacy and the Choice of Limited Partners by Venture Capitalists

By Rustam Abuzov, Will Gornall, and Ilya Strebulaev

In this paper, the authors analyze the effects of several rulings in 2002 that forced public Limited Partners (LPs) to disclose the performance of the funds underlying their portfolios to the public based on state-level Freedom of Information Acts (FOIAs). Venture capitalists are now one-third less likely to accept investments from state pensions and public university endowments as they are subject to disclosure to the public—and competitors. The authors use Burgiss Data to explore this issue further as our information is sourced directly from LPs and therefore is not limited by FOIA requests, and it provides broader coverage compared to other sources. 

The following is an excerpt from the paper:

“To shed some light on this matter, we study the performance of VC firms post-2002 based on Burgiss, which is not limited by its nature to FOIA requests and hence allows us to paint a more complete picture of the performance of top VC firms. The evidence shows that top VC firms outperformed others both before and after the disclosure, which is in line with the evidence of strong performance persistence in VC described in the literature (Harris et al., 2023). These results point to the economic cost of lost access, and also help alleviate the worry that the capital reallocations might be driven by VCs’ unwillingness to disclose poor dotcom bubble returns.”