Table 1
Definitions of Major Variables

Dependent variable:

Accuracy (of human
capital valuation)

Scale comprising 6 items. The degree to which expectations during due diligence matched actual on-the-job performance of target managers.
4 = high; 1 = low.

Independent variables:

Job analysis

Total person-hours spent conducting job analysis. A job analysis is the process of figuring out what human capital is needed for a venture to succeed.

Documentation analysis

Total person-hours spent analyzing written documentation on the human capital. Documentation includes resumes, legal searches, publications, or any other written material.

Past-oriented interview

Total person-hours spent conducting past-oriented interviews. Past-oriented interviews are discussions with target managers  about actual events in their career history.

Reference interview

Total person-hours spent conducting reference interviews. Reference interviews are discussions with people who have witnessed a target manager’s behaviors. Possible sources of reference interviews are: personal references, supervisors, coworkers, industry players, current employees, suppliers, customers, lawyers, accountants, bankers, or other investors.

Work sample discussions

Total person-hours spent conducting work samples. Work samples are sessions in which the venture capitalist “quizzes”  the target managers on issues related to the business.

Control variables:

VC years

Number of years that the respondent had been in the  venture capital industry.

Interviewing skill

Self-report of interviewing skill during deal.

Size of VC fund

Size of the VC fund measured in dollars. The VC fund is the pool of capital from which the venture capitalist makes an investment.