Pub Date : 2022-10-12DOI: 10.1080/13691066.2022.2129510
C. Mendoza, Isabel María Parra Oller, Madrid Álvaro Rezola, Nuria Suárez
ABSTRACT We analyze the influence of sustainability on the probability of achieving successful investment crowdfunding offerings. We use a sample of 1,741 investment crowdfunding offerings launched by 1,569 firms in the US during the period May 2016–September 2019 under the Form-C requirements of the JOBS Act. After accounting for potential endogeneity concerns affecting the degree of sustainability of each offering, results show that sustainability-related factors do not boost the chances of successful investment crowdfunding offerings. This result is not homogeneous across firms, operations, or financial environments. We obtain evidence on the influence of firm characteristics and on how offering affects the extent to which sustainability impacts success. Moreover, alternative funding sources and the market structure for funding portals also shape the influence of sustainability on offering success. Results are robust to considering both firm- and offering-level factors traditionally linked with success, as well as to different specifications of the econometric model, and to additional robustness tests.
{"title":"Investment crowdfunding has little faith in sustainability! At least for the moment","authors":"C. Mendoza, Isabel María Parra Oller, Madrid Álvaro Rezola, Nuria Suárez","doi":"10.1080/13691066.2022.2129510","DOIUrl":"https://doi.org/10.1080/13691066.2022.2129510","url":null,"abstract":"ABSTRACT We analyze the influence of sustainability on the probability of achieving successful investment crowdfunding offerings. We use a sample of 1,741 investment crowdfunding offerings launched by 1,569 firms in the US during the period May 2016–September 2019 under the Form-C requirements of the JOBS Act. After accounting for potential endogeneity concerns affecting the degree of sustainability of each offering, results show that sustainability-related factors do not boost the chances of successful investment crowdfunding offerings. This result is not homogeneous across firms, operations, or financial environments. We obtain evidence on the influence of firm characteristics and on how offering affects the extent to which sustainability impacts success. Moreover, alternative funding sources and the market structure for funding portals also shape the influence of sustainability on offering success. Results are robust to considering both firm- and offering-level factors traditionally linked with success, as well as to different specifications of the econometric model, and to additional robustness tests.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"9 1","pages":"91 - 115"},"PeriodicalIF":2.4,"publicationDate":"2022-10-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78998359","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-02DOI: 10.1080/13691066.2022.2134834
Xiao Lin, Jixuan Liu, Jia Pan, Yuxiang Xie
ABSTRACT Initial Coin Offering (ICO) is an emerging form of venture capital for startups. But little is known about how ICO affects firms’ tendency to engage in misconducts. Using a hand-collected sample of Chinese startups between 2016 and 2019, we find that ICO-backed firms engage in more corporate misconducts compared with VC-backed firms. Our baseline results are robust after adopting the extent of openness to western countries forced by unequal treaty as an instrument variable. Furthermore, our findings suggest that weak monitoring channel and resource independence channel are the underlying channels for the association between ICO and corporate misconducts. We also find that ICO-backed firms are more likely to go bankrupt compared with VC-backed firms in the future. Overall, our findings shed more lights on the dark side of ICO and indicate that the government should exercise stronger oversight on ICO in emerging countries.
{"title":"The dark side of initial coin offering: the case of corporate misconduct","authors":"Xiao Lin, Jixuan Liu, Jia Pan, Yuxiang Xie","doi":"10.1080/13691066.2022.2134834","DOIUrl":"https://doi.org/10.1080/13691066.2022.2134834","url":null,"abstract":"ABSTRACT Initial Coin Offering (ICO) is an emerging form of venture capital for startups. But little is known about how ICO affects firms’ tendency to engage in misconducts. Using a hand-collected sample of Chinese startups between 2016 and 2019, we find that ICO-backed firms engage in more corporate misconducts compared with VC-backed firms. Our baseline results are robust after adopting the extent of openness to western countries forced by unequal treaty as an instrument variable. Furthermore, our findings suggest that weak monitoring channel and resource independence channel are the underlying channels for the association between ICO and corporate misconducts. We also find that ICO-backed firms are more likely to go bankrupt compared with VC-backed firms in the future. Overall, our findings shed more lights on the dark side of ICO and indicate that the government should exercise stronger oversight on ICO in emerging countries.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"97 1","pages":"335 - 358"},"PeriodicalIF":2.4,"publicationDate":"2022-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86719754","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-30DOI: 10.1080/13691066.2022.2128932
Mari-Liis Kukk
ABSTRACT Securities-based crowdfunding has evolved into an important source of financing for small and medium-sized enterprises (SME), but little is known about how crowdfunding campaigns fit into the capital structure decisions of SMEs. Combining insights from SME capital structure and crowdfunding literatures results in high ambiguity, as crowdfunding seems to change SME financing dynamics, but in an uncertain direction. We construct variables based on previous work on SME capital structure literature to empirically test which characteristics help explain the choice to seek either equity or debt funding among firms using crowdfunding. We use 713 equity and 403 debt campaign announcements registered with the U.S. Securities and Exchange Commission under Regulation Crowdfunding. Our empirical procedure includes both the traditionally used logistic regression method as well as a random forest classifier. We find that less-established firms with smaller funding needs are more likely to issue equity, whereas firms with strong growth momentum and larger funding needs prefer debt.
{"title":"The debt-equity choice in crowdfunding: a two-method approach","authors":"Mari-Liis Kukk","doi":"10.1080/13691066.2022.2128932","DOIUrl":"https://doi.org/10.1080/13691066.2022.2128932","url":null,"abstract":"ABSTRACT Securities-based crowdfunding has evolved into an important source of financing for small and medium-sized enterprises (SME), but little is known about how crowdfunding campaigns fit into the capital structure decisions of SMEs. Combining insights from SME capital structure and crowdfunding literatures results in high ambiguity, as crowdfunding seems to change SME financing dynamics, but in an uncertain direction. We construct variables based on previous work on SME capital structure literature to empirically test which characteristics help explain the choice to seek either equity or debt funding among firms using crowdfunding. We use 713 equity and 403 debt campaign announcements registered with the U.S. Securities and Exchange Commission under Regulation Crowdfunding. Our empirical procedure includes both the traditionally used logistic regression method as well as a random forest classifier. We find that less-established firms with smaller funding needs are more likely to issue equity, whereas firms with strong growth momentum and larger funding needs prefer debt.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"4 1","pages":"287 - 308"},"PeriodicalIF":2.4,"publicationDate":"2022-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73133890","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-05DOI: 10.1080/13691066.2022.2109224
Luc Wynant, S. Manigart, Veroniek Collewaert
ABSTRACT This paper explores how contracts in private equity-backed buyouts shape corporate governance in portfolio companies. Drawing upon agency theory and incomplete contracting theory, 50 actual contracts are analyzed in detail. Contracts focus on reducing adverse selection risks through limiting pre-investment information asymmetries and aligning the goals of investors and sellers. Moral hazard risks vis-à-vis management are limited through limiting post-investment information asymmetries and limiting shirking behavior through limiting free cash flows. Goal alignment is achieved through high-powered incentive structures combined with shifting risk of underperformance to management. Managerial hold-up problems are addressed through restricting share transactions and limiting managerial actions. Residual powers and contingencies are mainly used to deal with incomplete contract designs due to uncertainties. Few clauses are used to address the reverse agency problem in which management is protected against moral hazard problems created by the private equity investor. PE contracts have transparent and very strong outcome-based cash flow rights, both limiting downside risk and rewarding upside potential. This contrasts with VC contracts which are especially contingency-based given the high levels of uncertainty of the portfolio companies.
{"title":"How private equity-backed buyout contracts shape corporate governance","authors":"Luc Wynant, S. Manigart, Veroniek Collewaert","doi":"10.1080/13691066.2022.2109224","DOIUrl":"https://doi.org/10.1080/13691066.2022.2109224","url":null,"abstract":"ABSTRACT This paper explores how contracts in private equity-backed buyouts shape corporate governance in portfolio companies. Drawing upon agency theory and incomplete contracting theory, 50 actual contracts are analyzed in detail. Contracts focus on reducing adverse selection risks through limiting pre-investment information asymmetries and aligning the goals of investors and sellers. Moral hazard risks vis-à-vis management are limited through limiting post-investment information asymmetries and limiting shirking behavior through limiting free cash flows. Goal alignment is achieved through high-powered incentive structures combined with shifting risk of underperformance to management. Managerial hold-up problems are addressed through restricting share transactions and limiting managerial actions. Residual powers and contingencies are mainly used to deal with incomplete contract designs due to uncertainties. Few clauses are used to address the reverse agency problem in which management is protected against moral hazard problems created by the private equity investor. PE contracts have transparent and very strong outcome-based cash flow rights, both limiting downside risk and rewarding upside potential. This contrasts with VC contracts which are especially contingency-based given the high levels of uncertainty of the portfolio companies.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"54 1","pages":"135 - 160"},"PeriodicalIF":2.4,"publicationDate":"2022-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81479702","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-02DOI: 10.1080/13691066.2022.2117669
P. M. Krysta, D. Kanbach
ABSTRACT Value creation of private equity (PE) firms in portfolio companies has received much attention in research. This systematic literature study aims to review, evaluate, and organize the empirical studies conducted in this field during the last four decades. Our findings from an in-depth analysis of 110 empirical papers reveal that the current understanding is incomplete, inconsistent, and unbalanced. Currently no consensus exists regarding a taxonomy or framework that encompasses all relevant dimensions and structures in the field. To guide future research, the study proposes a framework for value creation inputs, outcomes, and context factors. Constructed on a theoretical basis of agency and resource-based theory, we define distinct roles PE firms take in portfolio companies and specify an underlying typology of value creation levers that are applied. Additionally, we discuss the current research on outcomes of PE value creation efforts, and we identify and structure currently underrepresented context factors that influence value creation. Finally, we highlight potential avenues for future research, focusing on influential context factors and levers that catalyze growth in portfolio companies.
{"title":"Value creation in private equity portfolio companies: a structured review of evidence and proposed framework","authors":"P. M. Krysta, D. Kanbach","doi":"10.1080/13691066.2022.2117669","DOIUrl":"https://doi.org/10.1080/13691066.2022.2117669","url":null,"abstract":"ABSTRACT Value creation of private equity (PE) firms in portfolio companies has received much attention in research. This systematic literature study aims to review, evaluate, and organize the empirical studies conducted in this field during the last four decades. Our findings from an in-depth analysis of 110 empirical papers reveal that the current understanding is incomplete, inconsistent, and unbalanced. Currently no consensus exists regarding a taxonomy or framework that encompasses all relevant dimensions and structures in the field. To guide future research, the study proposes a framework for value creation inputs, outcomes, and context factors. Constructed on a theoretical basis of agency and resource-based theory, we define distinct roles PE firms take in portfolio companies and specify an underlying typology of value creation levers that are applied. Additionally, we discuss the current research on outcomes of PE value creation efforts, and we identify and structure currently underrepresented context factors that influence value creation. Finally, we highlight potential avenues for future research, focusing on influential context factors and levers that catalyze growth in portfolio companies.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"56 1","pages":"203 - 286"},"PeriodicalIF":2.4,"publicationDate":"2022-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79108005","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-31DOI: 10.1080/13691066.2022.2116797
C. Bellavitis, Christian Fisch, Paul P. Momtaz
ABSTRACT Blockchain technology and smart contracts are catalysts for decentralization and disintermediation. These new technologies reduce transaction costs, agency costs, and offer a basis for trustless social and economic interactions. They are fueling new business models for decentralized platforms and have revolutionized crowdfunding. A recent trend, Decentralized Autonomous Organizations (DAOs), stands to fundamentally transform organizing and governance. DAOs are blockchain-native, decentralized organizations that are collectively owned and managed by their members via smart contracts. In this note, we assess the promises and challenges of DAOs, with a focus on decentralized governance and disintermediation, and offer a first empirical glimpse at the rise and functioning of DAOs. Overall, DAOs may introduce a new era in organizational economics, transforming the global corporate landscape from hierarchical organizations to democratic and distributed organizations powered by organizational entrepreneurship and innovations.
{"title":"The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse","authors":"C. Bellavitis, Christian Fisch, Paul P. Momtaz","doi":"10.1080/13691066.2022.2116797","DOIUrl":"https://doi.org/10.1080/13691066.2022.2116797","url":null,"abstract":"ABSTRACT Blockchain technology and smart contracts are catalysts for decentralization and disintermediation. These new technologies reduce transaction costs, agency costs, and offer a basis for trustless social and economic interactions. They are fueling new business models for decentralized platforms and have revolutionized crowdfunding. A recent trend, Decentralized Autonomous Organizations (DAOs), stands to fundamentally transform organizing and governance. DAOs are blockchain-native, decentralized organizations that are collectively owned and managed by their members via smart contracts. In this note, we assess the promises and challenges of DAOs, with a focus on decentralized governance and disintermediation, and offer a first empirical glimpse at the rise and functioning of DAOs. Overall, DAOs may introduce a new era in organizational economics, transforming the global corporate landscape from hierarchical organizations to democratic and distributed organizations powered by organizational entrepreneurship and innovations.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"58 1","pages":"187 - 203"},"PeriodicalIF":2.4,"publicationDate":"2022-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73008153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-13DOI: 10.1080/13691066.2022.2086502
Max Berre, Benjamin Le Pendeven
ABSTRACT Startup-valuation is a critical area of research within entrepreneurial finance, but research on this topic is less consistent and thorough than overall valuation research. Peer-reviewed studies express a range of divergent views and approaches, and the focus varies widely. To bring clarity to this fragmented field, we conduct a systematic literature review, examining 87 peer-reviewed studies published between 1985 and 2020. We analyze these publications in detail and identify 36 startup-valuation drivers and cluster them into five macro-themes: Entrepreneur Characteristics; Firm Characteristics; Investor Characteristics; Market Conditions; and Deal Conditions. We then describe the valuation-impact of these drivers on startups. The range of drivers identified in the literature gives rise to construction of an integrative meta-model based on the macro-themes, placed into appropriate chronological position in the valuation process Our study also identifies key research-gaps and highlights promising directions for exploring the startup-valuation field.
{"title":"What do we know about startup-valuation drivers? A systematic literature review","authors":"Max Berre, Benjamin Le Pendeven","doi":"10.1080/13691066.2022.2086502","DOIUrl":"https://doi.org/10.1080/13691066.2022.2086502","url":null,"abstract":"ABSTRACT Startup-valuation is a critical area of research within entrepreneurial finance, but research on this topic is less consistent and thorough than overall valuation research. Peer-reviewed studies express a range of divergent views and approaches, and the focus varies widely. To bring clarity to this fragmented field, we conduct a systematic literature review, examining 87 peer-reviewed studies published between 1985 and 2020. We analyze these publications in detail and identify 36 startup-valuation drivers and cluster them into five macro-themes: Entrepreneur Characteristics; Firm Characteristics; Investor Characteristics; Market Conditions; and Deal Conditions. We then describe the valuation-impact of these drivers on startups. The range of drivers identified in the literature gives rise to construction of an integrative meta-model based on the macro-themes, placed into appropriate chronological position in the valuation process Our study also identifies key research-gaps and highlights promising directions for exploring the startup-valuation field.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"65 1","pages":"385 - 429"},"PeriodicalIF":2.4,"publicationDate":"2022-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90825012","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-06-02DOI: 10.1080/13691066.2022.2082898
Henrik Wesemann, Torben Antretter
ABSTRACT This paper investigates the performance effects of cross-border business angel investments. Examining 815 investments on a business angel investment platform, we find an inverted U-shaped relationship between (geographic and cultural) distance and investment returns. We further show that business angels in large syndicates are less sensitive to the costs of both geographic and cultural distance and earn consistently higher returns. Our study contributes to the literature on business angel internationalization and highlights the role of co-investment networks: network resources allow business angels to mitigate transaction costs associated with cross-border investments and improve their investment returns.
{"title":"The internationalization of business angel networks: do syndicates increase cross-border investment returns?","authors":"Henrik Wesemann, Torben Antretter","doi":"10.1080/13691066.2022.2082898","DOIUrl":"https://doi.org/10.1080/13691066.2022.2082898","url":null,"abstract":"ABSTRACT This paper investigates the performance effects of cross-border business angel investments. Examining 815 investments on a business angel investment platform, we find an inverted U-shaped relationship between (geographic and cultural) distance and investment returns. We further show that business angels in large syndicates are less sensitive to the costs of both geographic and cultural distance and earn consistently higher returns. Our study contributes to the literature on business angel internationalization and highlights the role of co-investment networks: network resources allow business angels to mitigate transaction costs associated with cross-border investments and improve their investment returns.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"29 1","pages":"487 - 514"},"PeriodicalIF":2.4,"publicationDate":"2022-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85894400","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-18DOI: 10.1080/13691066.2022.2063092
Mojca Svetek
ABSTRACT
Access to early-stage equity financing is vital to the growth of high-potential new ventures. To understand how entrepreneurs obtain external financing, researchers have studied the effectiveness of different signals that entrepreneurs send to investors. In this paper, we provide an overview of current research that uses signaling theory to study the likelihood and success of obtaining funding from angel investors and venture capitalists. The content analysis reveals that empirical research has well explored the signaling value of grants, prior investments, and the human and social capital of the firm to early-stage equity investors. However, we find that the literature on signaling effects on early-stage equity investors is fragmented and undertheorized. We note that while there has been an increase in the number of studies using signaling theory to explain success in obtaining early-stage equity financing, the theory remains underutilized, despite its suitability for this particular area of research. We describe the core ideas of signaling theory and how researchers have applied them in the context of venture capital and angel investing. We discuss how this stream of research can build on and extend signaling theory and highlight promising avenues for future research.
{"title":"Signaling in the context of early-stage equity financing: review and directions","authors":"Mojca Svetek","doi":"10.1080/13691066.2022.2063092","DOIUrl":"https://doi.org/10.1080/13691066.2022.2063092","url":null,"abstract":"<p><b>ABSTRACT</b></p><p>Access to early-stage equity financing is vital to the growth of high-potential new ventures. To understand how entrepreneurs obtain external financing, researchers have studied the effectiveness of different signals that entrepreneurs send to investors. In this paper, we provide an overview of current research that uses signaling theory to study the likelihood and success of obtaining funding from angel investors and venture capitalists. The content analysis reveals that empirical research has well explored the signaling value of grants, prior investments, and the human and social capital of the firm to early-stage equity investors. However, we find that the literature on signaling effects on early-stage equity investors is fragmented and undertheorized. We note that while there has been an increase in the number of studies using signaling theory to explain success in obtaining early-stage equity financing, the theory remains underutilized, despite its suitability for this particular area of research. We describe the core ideas of signaling theory and how researchers have applied them in the context of venture capital and angel investing. We discuss how this stream of research can build on and extend signaling theory and highlight promising avenues for future research.</p>","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"7 1","pages":""},"PeriodicalIF":2.4,"publicationDate":"2022-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138538923","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-03DOI: 10.1080/13691066.2022.2101158
D. Christopoulos, Stefanie Köppl, Monika Köppl-Turyna
ABSTRACT This study investigates the phenomenon of syndication in the venture capital industry. Investments conducted by syndicates are believed to have a better chance of being successful, which can be measured by the survival probability of portfolio companies or by successful exits. Using a novel and large dataset covering several countries, our analysis shows that investors’ strong network ties are associated with the success of portfolio companies in Europe. We also demonstrate differences in the association of network centrality with survival between different financing rounds, with the former being more important in early-stage investments and in the first round of financing. Furthermore, we show a strong association of investors’ network ties with the sales growth of portfolio companies before and after the deal, which is consistent in both selection and value-added channels. Finally, we explicitly account for the endogeneity of syndicate formation and show that the results hold if we instrument for venture firms’ network properties, as indicated by significant and correspondingly larger coefficients.
{"title":"Syndication networks and company survival: evidence from European venture capital deals","authors":"D. Christopoulos, Stefanie Köppl, Monika Köppl-Turyna","doi":"10.1080/13691066.2022.2101158","DOIUrl":"https://doi.org/10.1080/13691066.2022.2101158","url":null,"abstract":"ABSTRACT This study investigates the phenomenon of syndication in the venture capital industry. Investments conducted by syndicates are believed to have a better chance of being successful, which can be measured by the survival probability of portfolio companies or by successful exits. Using a novel and large dataset covering several countries, our analysis shows that investors’ strong network ties are associated with the success of portfolio companies in Europe. We also demonstrate differences in the association of network centrality with survival between different financing rounds, with the former being more important in early-stage investments and in the first round of financing. Furthermore, we show a strong association of investors’ network ties with the sales growth of portfolio companies before and after the deal, which is consistent in both selection and value-added channels. Finally, we explicitly account for the endogeneity of syndicate formation and show that the results hold if we instrument for venture firms’ network properties, as indicated by significant and correspondingly larger coefficients.","PeriodicalId":46643,"journal":{"name":"Venture Capital","volume":"12 1","pages":"105 - 135"},"PeriodicalIF":2.4,"publicationDate":"2022-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91170373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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