The effects of prior co-investments on the performance of venture capitalist syndicates: A relational agency perspective

Cristiano Bellavitis, Joost Rietveld, Igor Filatotchev

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Research Summary: This study provides a reconciliation of previous findings regarding the effects of prior co-investments among venture capitalists (VCs) and the performance of VC syndicates. We propose a relational agency framework outlining cost–benefit trade-offs associated with prior co-investments between VCs. A longitudinal study of 4,550 U.S. ventures receiving syndicated investments from 1980 to 2017 shows that there exists an inverted U-shaped relationship between the number of prior co-investments and a venture's likelihood of a successful exit through initial public offering or merger and acquisition. We further find that the relationship between prior co-investments and syndicate performance is moderated by venture- and partner-specific risks. Managerial Summary: We study the effects of prior co-investments among venture capital (VC) firms on the performance of VC syndicates. We propose a framework outlining cost–benefit trade-offs associated with prior co-investments between VCs. A study of 4,550 U.S. ventures receiving syndicated investments shows that there exists an inverted U-shaped relationship between the number of prior co-investments and a venture's likelihood of a successful exit through initial public offering or merger and acquisition. Our findings hold implications for managers considering whom to partner with for future co-investments and the conditions under which prior co-investments are more or less likely to be beneficial.

Original languageEnglish (US)
Pages (from-to)240-264
Number of pages25
JournalStrategic Entrepreneurship Journal
Volume14
Issue number2
DOIs
StatePublished - Jun 1 2020
Externally publishedYes

Keywords

  • entrepreneurial finance
  • performance
  • prior co-investments
  • syndication
  • venture capital

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Strategy and Management

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