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What drives Venture Capital Syndication

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Author Info
Christian Hopp (University of Konstanz)
Finn Rieder (German Banking Association)

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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.

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Publisher Info
Paper provided by EconWPA in its series Finance with number 0412023.

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Date of creation: 22 Dec 2004
Date of revision: 12 Jan 2006
Handle: RePEc:wpa:wuwpfi:0412023

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Web page: http://129.3.20.41

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Related research
Keywords: Venture Capital; Syndication;

Other versions of this item:

Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sophie Manigart & Miguel Meuleman, 2002. "Why do European Venture Capital Companies syndicate?," Finance 0210006, EconWPA. [Downloadable!]
    Other versions:
  2. Mike Wright, 1998. "Venture Capital and Private Equity: A Review and Synthesis," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 25(5&6), pages 521-570. [Downloadable!] (restricted)
  3. Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
  4. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-27, September. [Downloadable!] (restricted)
    Other versions:
  5. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September. [Downloadable!] (restricted)
  6. Lockett, Andy & Wright, Mike, 2001. "The syndication of venture capital investments," Omega, Elsevier, vol. 29(5), pages 375-390, October. [Downloadable!] (restricted)
  7. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Casamatta, Catherine & Haritchabalet, Carole, 2007. "Experience, Screening and Syndication in Venture Capital Investments," IDEI Working Papers 443, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  2. Casamatta, Catherine & Haritchabalet, Carole, 2007. "Competition Between Informed Venture Capitalists for the Financing of Entrepreneurs," IDEI Working Papers 444, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  3. Christian Hopp & Finn Rieder, 2005. "Strukturanalyse des deutschen Marktes für Beteiligungskapital: Unterschiede im Investitionsverhalten unabhängiger, bankenassoziierter und öffentlicher Venture-Capital-Investoren und Auswirkungen au," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 74(4), pages 140-152. [Downloadable!] (restricted)
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