Overconfident VC firms tend to raise follow-on funds more quickly and prefer IPOs over M&As for exits. Higher overconfidence is linked to shorter times for raising new capital and exiting investments . The study shows that overconfidence affects VC performance, influencing fundraising success and exit strategies , highlighting the impact of cognitive biases on financial decisions in venture capital.

This study provides crucial insights into how overconfidence bias among venture capital (VC) firms impacts their investment behaviors and outcomes. Analyzing U.S. VC exits from 2000 to 2019, it reveals that higher overconfidence leads to faster and more frequent fundraising and a preference for IPOs over M&As for exits. Understanding these dynamics helps stakeholders—entrepreneurs, investors, and policymakers—anticipate how psychological biases influence investment strategies, exit timelines, and market behavior, ultimately leading to more effective decision-making and strategic planning in the venture capital space.