Passive syndicates and risk in venture capital investments

George Geronikolaou

Managerial and Decision Economics, 2022, vol. 43, issue 6, 2033-2037

Abstract: This paper presents a model in which a budget‐constrained venture capital investor forms a syndicate and coinvests in a risky project. Assuming that syndication ameliorates competition among investors and that investee's outside option increases with investor competition, the model predicts that even if follower syndicate members are passive and do not add value to the project, the size of the syndicate is positively related to the maximum risk that the lead venture capital investor can tolerate.

Date: 2022
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https://doi.org/10.1002/mde.3506

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:43:y:2022:i:6:p:2033-2037

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