Proximity relations and the fate of VC-backed startups: Evidence from a global 33-year-long dataset

Nicolas Bédu, Olivier Brossard () and Matthieu Montalban
Additional contact information
Nicolas Bédu: ART-Dev, Univ Montpellier, CNRS, Univ Paul Valéry Montpellier 3, Univ Perpignan Via Domitia, CIRAD
Olivier Brossard: Sciences Po Toulouse, Université de Toulouse, LEREPS
Matthieu Montalban: Univ Bordeaux, CNRS, INRAE, BSE, UMR 6060, UMR 1441

Journal of Evolutionary Economics, 2024, vol. 34, issue 2, No 6, 429-464

Abstract: Abstract The characteristics of the financial arrangements established to finance startups affect the fate of startups. Among these features, we particularly focus on the proximities and differences between venture capital (VC) investors in syndicated investments. We consider the proximities between investors in a startup and between investors and the startup. Against the background of the theoretical literature dealing with proximity relations, we distinguish five types of proximities between VC investors and between VC investors and the startups they finance: geographic, institutional, organizational, social, and cognitive. We then test six hypotheses regarding the impacts of these proximities on the likelihood of three events occurring in VC-backed startups: obtaining a later-stage round of funding, going public, and being merged or acquired. We implement these tests on a 33-year-long, 68-country sample using survival models adapted to account for tied failures and competing events. We find that the five forms of proximity relations are influential but have distinct roles. We also find that the impacts of these proximities are nonlinear in the sense that too much proximity/distance always ends up reverting the effects of proximity/distance. Finally, we observe that as the theoretical literature predicts, cognitive proximity is positively correlated with the probability of a merger and acquisition (M&A) but negatively correlated with the likelihood of an initial public offering (IPO).

Keywords: Venture capital; Syndication; Startups; Proximity relations; Cognitive proximity (search for similar items in EconPapers)
JEL-codes: G24 G34 L21 L26 M13 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s00191-024-00860-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joevec:v:34:y:2024:i:2:d:10.1007_s00191-024-00860-y

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/191/PS2

DOI: 10.1007/s00191-024-00860-y

Access Statistics for this article

Journal of Evolutionary Economics is currently edited by Uwe Cantner, Elias Dinopoulos, Horst Hanusch and Luigi Orsenigo

More articles in Journal of Evolutionary Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().