Syndication Networks and Investment Activity in the Venture Capital Industry

26 Pages Posted: 29 Sep 2014

Date Written: 2014

Abstract

The wide-spread use of syndication among venture capital investors has led to the creation of extensive co-investment networks which may in turn affect syndication and investment activity. Using an extensive ten year panel data set of 3,797 venture capital and 1,290 angel investors, this study finds that investors with more direct contacts, in particular with later stage investors, exhibit higher deal flow and faster extend their network. Linking syndication motives to certain network structures allows for inferring on the significance of syndication rationales. Accessing (complementary) resources appears to be the strongest incentive to syndicate, whereas deal sourcing and especially reciprocity considerations appear relatively weak syndication motives. Thereby, using syndicated financing to overcome resource constraints appears even more pivotal for early stage angel investors.

Keywords: syndication, venture capital, networks, deal flow

JEL Classification: C23, C49, G24, M13

Suggested Citation

Werth, Jochen Christian, Syndication Networks and Investment Activity in the Venture Capital Industry (2014). Available at SSRN: https://ssrn.com/abstract=2502233 or http://dx.doi.org/10.2139/ssrn.2502233

Jochen Christian Werth (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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