Venture Capital Syndication in Times of Economic Crisis
Geertjan De Vries
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute
University of Trier - Faculty of Management; Erasmus University Rotterdam - Department of Applied Economics
June 22, 2010
Venture Capital, Vol. 13, No. 3, pp. 195-213
This study analyzes the effects of the 2000-2001 dot-com crisis and the 2008-2009 financial crisis on venture capital syndication. Using propensity score matching analysis, we show that during the two crises, VCFs had a lower tendency to syndicate their investments, and the size of the syndicates was smaller. This effect is found to be stronger for later-stage financing than for early-stage financing. We explain the lower propensity to syndicate and the reduction in syndicate size by the existence of fewer exit opportunities for venture capital firms and a lower supply of funds for the venture capital industry. Implications for venture capital firms and start-up firms are discussed.
Number of Pages in PDF File: 29
Keywords: Venture capital, syndication, financial crisis, dot-com crisis, innovation finance, recession, propensity score matching analysis
JEL Classification: G24, G01, L26Accepted Paper Series
Date posted: June 22, 2010 ; Last revised: November 2, 2011
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