Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships

59 Pages Posted: 26 Jul 2019 Last revised: 14 Sep 2019

See all articles by Qianqian Du

Qianqian Du

Hong Kong Polytechnic University

Thomas F. Hellmann

University of Oxford - Said Business School; University of Oxford - Said Business School; European Corporate Governance Initiative

Multiple version iconThere are 3 versions of this paper

Date Written: July 1, 2019

Abstract

Does doing more deals together always strengthen investor relationships? Based on the relationships of the top 50 US venture capital firms, this paper focuses on the strengths of relationships and their dynamic evolution. Empirical estimates indicate that having a deeper relationship leads to fewer, not more future coinvestments. Moreover, deeper relationships lead to lower exit performance, even after controlling for endogeneity. Interestingly, deeper relationships first lead to lower performance, and subsequently lead to a slowdown in the relationship intensity. Relationship effects are more negative for VC firms with less central network positions, and for deals made in “hot” investment markets.

Keywords: Venture Capital; Investment Networks; Investor relationships; Network Dynamics

JEL Classification: G24

Suggested Citation

Du, Qianqian and Hellmann, Thomas F., Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships (July 1, 2019). Saïd Business School WP 19-10, July 2019, Available at SSRN: https://ssrn.com/abstract=3427110 or http://dx.doi.org/10.2139/ssrn.3427110

Qianqian Du (Contact Author)

Hong Kong Polytechnic University ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Thomas F. Hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

European Corporate Governance Initiative ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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