Venture Capital Syndication in Times of Economic Crisis

Venture Capital, Vol. 13, No. 3, pp. 195-213

29 Pages Posted: 22 Jun 2010 Last revised: 2 Nov 2011

See all articles by Geertjan de Vries

Geertjan de Vries

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute

Jorn H. Block

University of Trier - Faculty of Management; Erasmus University Rotterdam (EUR) - Institute of Management (ERIM)

Date Written: June 22, 2010

Abstract

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.

Keywords: Venture capital, syndication, financial crisis, dot-com crisis, innovation finance, recession, propensity score matching analysis

JEL Classification: G24, G01, L26

Suggested Citation

de Vries, Geertjan and Block, Jorn Hendrich, Venture Capital Syndication in Times of Economic Crisis (June 22, 2010). Venture Capital, Vol. 13, No. 3, pp. 195-213, Available at SSRN: https://ssrn.com/abstract=1628649

Geertjan De Vries (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Tinbergen Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Jorn Hendrich Block

University of Trier - Faculty of Management ( email )

D-54296
Germany

Erasmus University Rotterdam (EUR) - Institute of Management (ERIM) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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