Narcissistic Entrepreneurs and Venture Capital Investment and Contracting

We study how venture capital firms (VCs), one major capital provider for early-stage entrepreneurial companies, respond to narcissistic entrepreneurs. VCs prefer to invest in companies with narcissistic entrepreneurs. Conditional on making an investment, VCs are more likely to impose contingent contracts on narcissistic entrepreneurs that would require the latter to compensate the VCs if certain pre-specified targets fail to be met. Furthermore, conditional on accepting VCs’ contingent contracts, narcissistic entrepreneurs are subject to more restrictive contingent contracts. There is weak evidence that VC-imposed contingent contracts help mitigate the negative impact of entrepreneur narcissism on entrepreneurial company success