What drives Venture Capital Syndication

Christian Hopp and Finn Rieder
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Finn Rieder: German Banking Association

Finance from University Library of Munich, Germany

Abstract: This paper analyses the syndication behavior of VC organisations and the factors influencing their overall propensity to co-invest. We develop hypothesis concerning the investment behavior of Venture Capitalists in the German market and compare these hypothesis to the actual empirical evidence from a data set including 2,500 VC investments. We find that the underlying theories of financial and resource driven motives can indeed be used to explain the observed behavior for syndicated venture capital investments. We show that mainly Resource driven motives foster the propensity to syndicate an investment. Additionally, we find that Venture Capital Firms tend to diversify their portfolio, such that both motives of venture capital syndication (Finance and Resource driven) seem to be present at the same time and play a significant role simultaneously for the decision to jointly co-invest. We find evidence that a lower level of experience and expertise fosters the need to syndicate an investment.

Keywords: Venture Capital; Syndication (search for similar items in EconPapers)
JEL-codes: G24 G31 (search for similar items in EconPapers)
Date: 2004-12-22, Revised 2006-01-12
New Economics Papers: this item is included in nep-fin
Note: Type of Document - pdf
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: What drives venture capital syndication? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0412023

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