Gompers develops and tests the grandstanding hypothesis: young venture capital firms take portfolio companies public earlier than established VC firms do specifically to build a track record and raise capital for their next fund, using a sample of 433 IPOs to test the theory. Companies backed by young VC firms are found to be younger at IPO and more underpriced than those backed by established VC firms, a pattern consistent with young VCs accepting a real financial cost, underpricing transfers wealth from existing shareholders including the VC itself to new IPO shareholders, in exchange for the reputational benefit of a completed, visible exit. Young VC firms also sat on portfolio company boards for a shorter period before the IPO, held smaller equity stakes at listing, and specifically timed the IPO to precede or coincide with their own fundraising for a follow-on fund, directly tying the exit decision to the VC firm's own capital-raising needs rather than purely to the portfolio company's interests.

Founders evaluating a term sheet from a newer, less established VC firm get a genuinely important, empirically grounded warning: the paper shows younger VCs have a documented incentive to push for an earlier IPO than may be optimal for the company, specifically to build the VC's own reputation and support its next fundraise, a conflict founders should factor into board and exit timing conversations. This is one of the most foundational and widely cited papers in venture capital finance, coining the term grandstanding, now standard vocabulary in academic and practitioner discussions of VC reputation building, making it essential background for anyone reading later papers that build directly on it. LPs evaluating a young, first or second time fund manager also get a specific, testable pattern to watch for, earlier and more underpriced exits, smaller retained equity stakes, and IPO timing that lines up suspiciously well with the manager's own fundraising calendar, a potential signal that decisions are driven by the fund's own reputational needs rather than pure return maximization.