Abstract

Over the past decade, the venture capitalists’ (VCs’) syndication (Wilson, 1968) has attracted an increasing interest on behalf of scholars. Although existing research provides us with a large panorama of different pros and cons of syndication, it fails to show how syndication actually affects the VCs’ performance. The main reason is the lack of data on individual VC firms’ performance (Hochberg et al., 2003). Our data enables us to fill in this gap.

To begin with, we examine the propensity of ventures to get syndicated. In line with the obtained results we examine how syndication strategy influences VCs’ performance. Drawing on the portfolio diversification argument, we will first examine a direct link between the frequency of syndication and the VC’s performance. Secondly, we test the value-added versus coordination cost arguments by examining a concave relationship between the degree of syndication and the VCs’ performance. Thirdly, to test the adverse selection phenomenon we will examine if the syndication in the early-stage will have a positive impact on the VC’s performance. We will analyse a link between the late-stage syndication and the VC’s performance, to test the added-value versus the “window dressing” motive.

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