The Role of Venture Capital Syndication in Value Creation for Entrepreneurial Firms
Indiana University - Kelley School of Business
May 19, 2010
Review of Finance, Forthcoming
This paper provides evidence that venture capital (VC) syndication creates value for entrepreneurial firms in two dimensions. First, VC syndication creates product market value for their portfolio firms. Specifically, VC syndicates invest significant amounts in younger firms, in earlier financing rounds, and in early stage firms. Further, VC syndicates nurture innovation of their portfolio firms and help them achieve better post-IPO operating performance. Second, VC syndication creates financial market value for their portfolio firms. Specifically, VC syndicate-backed firms are more likely to have a successful exit, enjoy a lower initial public offering (IPO) underpricing, and receive a higher IPO market valuation. The findings are robust to a variety of alternative syndication measures, subsamples, econometric models, and controlling for endogeneity in VC syndication.
Number of Pages in PDF File: 46
Keywords: Venture Capital, Syndication, Value Creation, Firm Performance
JEL Classification: G24, G23, O31Accepted Paper Series
Date posted: March 26, 2008 ; Last revised: May 21, 2011
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