When do venture capitalists collaborate? Evidence on the driving forces of venture capital syndication

When do venture capitalists collaborate? Evidence on the driving forces of venture capital... Using a sample of 2,373 unique capital contributions from 437 venture capitalists (VCs) over subsequent rounds into 961 start-ups during the period 1995–2005 in Germany we disentangle the circumstances under which lead VCs engage in syndicate relationships with partner VCs. The results indicate that syndication is more pronounced when VCs face higher risks that need to be diversified and capital burdens are larger. Moreover, we document that industry investment experience lends legitimacy to lead VCs, allowing them to enter syndicate relationships to enhance their network positions. In general, greater industry experience is associated with more syndication. Lastly, the results show that lead VCs involve new/additional partners in subsequent financing rounds to leverage their idiosyncratic skills and knowledge to improve deal selection and/or provide a better quality of managerial advice. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

When do venture capitalists collaborate? Evidence on the driving forces of venture capital syndication

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Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC.
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-008-9169-z
Publisher site
See Article on Publisher Site

Abstract

Using a sample of 2,373 unique capital contributions from 437 venture capitalists (VCs) over subsequent rounds into 961 start-ups during the period 1995–2005 in Germany we disentangle the circumstances under which lead VCs engage in syndicate relationships with partner VCs. The results indicate that syndication is more pronounced when VCs face higher risks that need to be diversified and capital burdens are larger. Moreover, we document that industry investment experience lends legitimacy to lead VCs, allowing them to enter syndicate relationships to enhance their network positions. In general, greater industry experience is associated with more syndication. Lastly, the results show that lead VCs involve new/additional partners in subsequent financing rounds to leverage their idiosyncratic skills and knowledge to improve deal selection and/or provide a better quality of managerial advice.

Journal

Small Business EconomicsSpringer Journals

Published: Jan 13, 2009

References

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