Ben Amor and Kooli build an overconfidence index from a sample of US venture capital exits via IPOs and M&As between 2000 and 2019, then test how that bias shapes VC behavior. They find a strong positive relationship between overconfidence and the follow-on capital a VC firm raises, and that more overconfident VCs raise their next fund faster than less confident peers. Overconfident VCs show an exit preference favoring IPOs over M&A exits, and the degree of overconfidence is negatively and significantly associated with time to exit, meaning more overconfident VCs push portfolio companies toward liquidity events sooner. The paper situates these findings within a broader behavioral finance literature linking psychological traits like managerial optimism to financial decisions and investment outcomes.

LPs evaluating a GP's fundraising speed or exit timing get a behavioral explanation that goes beyond skill or market conditions: a firm's overconfidence, not just performance, can independently predict how fast it raises new capital and how quickly it pushes companies toward exit overall. This matters directly for due diligence, since a rapid fundraising cycle or a strong tilt toward IPO exits over M&A could reflect a psychological pattern rather than superior judgment, and the two are easy to conflate without a study like this one to separate them out very clearly. Founders can also use the finding to anticipate that an overconfident investor may push for a faster or more IPO-oriented exit path than the company's fundamentals alone would justify.