Do portfolio companies learn from their peers? Evidence from venture capital funding

Salim Chahine () and Mai Daher ()
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Salim Chahine: Banque du Liban
Mai Daher: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1121, Bank of England working papers from Bank of England

Abstract: We investigate the impact of ‘learning from peers’ on the fundraising abilities of start-up companies. Employing data on the financing rounds of privately owned portfolio companies, we find that companies observe the round amounts of their most successful peers and learn to negotiate higher round amounts with venture capital investors. We further show that the number of common directors or venture capital firms between portfolio companies and their most successful peers has a positive impact on the round amounts of these portfolio companies, which supports the existence of conversational learning. Moreover, observational learning from peers is higher in hot markets, where investors rely on less costly information on peers. Our findings confirm that both observational and conversational learning allow portfolio companies to be in a better negotiating position, thus enhancing their ability to secure funding and invest in their growth.

Keywords: Peer effect; portfolio companies; learning; venture capital funding; exit (search for similar items in EconPapers)
JEL-codes: G24 G32 G41 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2025-02-28
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1121

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