1. What Determines Venture Capital Fundraising? Gompers and Lerner (1999) Fund performance Top performing MUTUAL funds have substantial new commitments to their funds in the subsequent year. Money leaves poorly-performing new funds. Reputation of fund Older and larger funds will have more established reputations.

2. What Determines Venture Capital Fundraising? Gompers and Lerner (1999) Capital Gains Taxes Most returns from investing in venture funds in the form of capital gains. Hence, lowering of the capital gains tax rate should increase flow of funds to venture funds. (But most investors in venture capital after 1980 have been tax-exempt institutions.) Lower capital gains taxes make it relatively more attractive for a manager to become an entrepreneur and start his/her own company.

3. What Determines Venture Capital Fundraising? Gompers and Lerner (1999) Clarification of ERISA’s Prudent Man Rule in 1978 After 1978 portfolio diversification was a legitimate consideration in determining the prudence of an individual investment. Growth of Economy If the economy is growing quickly, more attractive opportunities for entrepreneurs to start new firms and hence, more opportunities for venture capitalists to invest.