Learning and Syndication in Venture Capital Investments

Carole Haritchabalet and Catherine Casamatta

No 3867, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The objective of this Paper is to understand: i) why venture capital investments are often syndicated; and ii) what are the effects of syndication on the post-investment involvement of venture capitalists. We analyse a model where a venture capitalist's efficiency to screen an uncertain project depends both on experience and on the signal they can obtain from another specialized investor. Disclosing the existence of the investment project to this second investor is harmful since the latter becomes de facto a potential competitor. We show that this potential competition can only be avoided through syndication, which affects the learning process. We further explore the cost of syndication in terms of investment decisions or post-investment involvement of venture capitalists.

Keywords: Venture capital; Syndication; Learning; Competition (search for similar items in EconPapers)
JEL-codes: D80 G20 G30 (search for similar items in EconPapers)
Date: 2003-04
New Economics Papers: this item is included in nep-cfn and nep-ent
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Citations: View citations in EconPapers (18)

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