Common Venture Capital Investors

Abstract

Common venture capital (VC) investors represent VC firms with ownership stakes in multiple startups, which typically operate in the same industry or product markets.  Thus, the startups have one key feature in common: they are all part of a single VC firm’s investment portfolio.  This review article highlights the rise of common VC investors: less than 10% of startups in 1995 had a common VC, compared to over 50% by 2018.  We explore the drivers behind this increase, including regulatory changes, evolving VC investment strategies, and technological advancements.  We summarize existing research on how common VC investors influence startup outcomes, including alliance formation, innovative efficiency, financing, and valuations.  Then, we contextualize these findings within the broader common ownership literature, highlighting key differences between private and public firms.  Compared to public markets, the key assumptions underlying the potential for anticompetitive effects from common ownership are better satisfied in private markets.  Finally, we conclude by offering suggestions for future research.

Keywords: Common venture capital investors, Venture Capital, Private Equity, Common Ownership, Entrepreneurship, Innovation, Corporate Governance

JEL Classification: G32, G24, G28