We study how information disclosure concerns shape the choice of limited partners by venture capitalists (VCs). Late-2002 court rulings prevented public investors from providing confidentiality to investment managers. The best-performing VCs, but not other managers, responded by excluding public investors from their new funds. Lost access reduced public investor returns by $1.6 billion relative to $14 billion of their VC commitments. Access was restored by ensuing legislation that reduced disclosure requirements and by contractual innovations allowing VCs to provide less information to their public investors, with both changes focusing on protecting portfolio company information.
