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Why Do Venture Capital Companies Syndicate?

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Author Info

  • S. MANIGART

    ()

  • A. LOCKETT
  • M. MEULEMAN

    ()

  • M. WRIGHT
  • H. LANDSTRÖM
  • H. BRUINING
  • P. DESBRIÈRES
  • U. HOMMEL

Abstract

Financial theory, access to deal flow, selection and monitoring skills are used to explain syndication in venture capital (VC) firms in six European countries. In contrast with US findings, portfolio management motives are more important for syndication than individual deal management motives. Risk sharing, portfolio diversification and access to larger deals are more important than selection and monitoring of deals. This holds for later stage and for early stage investors. Value adding is a stronger motive for syndication for early stage investors than for later stage investors, however. Non-lead investors join syndicates for the selection and value adding skills of the syndicate partners.

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File URL: http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_04_226.pdf
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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/226.

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Length: 43 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/226

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References

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  1. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
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Cited by:
  1. Bertoni, Fabio & Tykvová, Tereza, 2013. "Which form of venture capital is most supportive of innovation? Evidence from European biotechnology companies," FZID Discussion Papers 69-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  2. Bertoni, Fabio & Tykvová, Tereza, 2012. "Which form of venture capital is most supportive of innovation?," ZEW Discussion Papers 12-018, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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