Connected VCs and Strategic Alliances

Posted: 12 Apr 2018 Last revised: 3 Jun 2019

See all articles by Leonhard Brinster

Leonhard Brinster

University of Hohenheim

Tereza Tykvova

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Date Written: February 7, 2019

Abstract

We study a new channel through which portfolio companies benefit from ties among venture capitalists (VCs). We show that these ties improve companies’ access to strategic alliance partners from connected VCs’ portfolios. While prior literature demonstrates that alliances are more frequent among companies sharing the same VC, we provide evidence that the "connected-VC-effect" dominates the "same-VC-effect". The "connected-VC-effect" is stronger when transaction and information costs increase, consistent with VC ties resolving asymmetric information problems. Strategic alliances between companies from connected VCs’ portfolios tend to be well-performing. Our results show that this type of alliances improves companies’ IPO chances.

Keywords: Venture Capital, Strategic Alliance, Syndication, Prior Ties, Connected Venture Capital Investors

JEL Classification: G24, L24, L26

Suggested Citation

Brinster, Leonhard and Tykvova, Tereza, Connected VCs and Strategic Alliances (February 7, 2019). Available at SSRN: https://ssrn.com/abstract=3161356

Leonhard Brinster (Contact Author)

University of Hohenheim ( email )

Wollgrasweg 49
Stuttgart, 70599
Germany

Tereza Tykvova

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
265
PlumX Metrics