Motives and Effects of Syndication Strategy in French Venture Capital Deals

32 Pages Posted: 12 May 2011

See all articles by Mireille Jaeger

Mireille Jaeger

University of Lorraine - CEREFIGE Research Center; Université de Lorraine

Vu To Huy

State bank of Viet Nam, associated to CEREFIGE

Date Written: May 1, 2011

Abstract

In this paper, we investigate the strategy of french venture capital firms concerning syndication, and the factors of syndicating, from a data set of 1789 VC investments. The limited available evidence suggests that venture capital syndicated deals are generally big and are driven by industry characteristics. We show that sharing risk and increasing portfolio diversification is a more important motive for syndication than accessing to additional intangible resources and skill or limiting potential competition. The amount of the financing round has a positive impact on the probability of syndication. We did not find any link between the type of owners of venture capital firms and their propensity to co-invest. Our data suggest that syndication is associated with decreasing performance of companies in the VC firms investment portfolio, measured by the return on capital employed and the ratio of Conan-Holder. The social impact of syndication is not highlighted in the short term as the employment does not increase in companies financed by syndicated investors.

Keywords: Venture Capital Funds, Syndication, Performance, Organization, Governanc

Suggested Citation

Jaeger, Mireille and To Huy, Vu, Motives and Effects of Syndication Strategy in French Venture Capital Deals (May 1, 2011). International Conference of the French Finance Association (AFFI), May 11-13, 2011. Available at SSRN: https://ssrn.com/abstract=1836906 or http://dx.doi.org/10.2139/ssrn.1836906

Mireille Jaeger (Contact Author)

University of Lorraine - CEREFIGE Research Center ( email )

13 rue Michel Ney
Nancy, 54000
France

Université de Lorraine ( email )

Nancy, 54000
France

Vu To Huy

State bank of Viet Nam, associated to CEREFIGE ( email )

Vietnam

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