Building Relationships Early: Banks in Venture Capital

45 Pages Posted: 2 Jan 2004

See all articles by Thomas F. Hellmann

Thomas F. Hellmann

University of Oxford - Said Business School; University of Oxford - Said Business School

Laura Anne Lindsey

Arizona State University (ASU) - Finance Department

Manju Puri

Duke University - Fuqua School of Business; NBER; FDIC

Multiple version iconThere are 3 versions of this paper

Date Written: May 2007

Abstract

This paper examines bank behavior in venture capital. It considers the relationship between a bank's venture capital investments and its subsequent lending, which can be thought of as intertemporal cross-selling. Theory suggests that unlike independent venture capital firms, banks may be strategic investors who seek complementarities between venture capital and lending activities. We find evidence that banks use venture capital investments to build lending relationships. Having a prior relationship with a company in the venture capital market increases a bank's chance of subsequently making a loan to that company. Companies can benefit from these relationships through more favorable loan pricing.

Suggested Citation

Hellmann, Thomas F. and Lindsey, Laura Anne and Puri, Manju, Building Relationships Early: Banks in Venture Capital (May 2007). Sauder School of Business Working Paper; AFA 2004 San Diego Meetings. Available at SSRN: https://ssrn.com/abstract=474500 or http://dx.doi.org/10.2139/ssrn.474500

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

Laura Anne Lindsey

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

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