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Venture capital syndication in times of economic crisis

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  • Geertjan De Vries
  • Joern H. Block

Abstract

This study analyses the effects of the 2000--2001 dot-com crisis and the 2008--2009 financial crisis on venture capital syndication. Using propensity score matching analysis, we show that during the two crises, venture capital firms (VCFs) had a lower tendency to syndicate their investments, and the size of the syndicates was smaller. This effect is found to be stronger for later-stage financing than for early stage financing. We explain the lower propensity to syndicate and the reduction in syndicate size by the existence of fewer exit opportunities for VCFs and a lower supply of funds for the venture capital industry. Implications for VCFs and start-up firms are discussed.

Suggested Citation

  • Geertjan De Vries & Joern H. Block, 2011. "Venture capital syndication in times of economic crisis," Venture Capital, Taylor & Francis Journals, vol. 13(3), pages 195-213, June.
  • Handle: RePEc:taf:veecee:v:13:y:2011:i:3:p:195-213
    DOI: 10.1080/13691066.2011.600278
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    File URL: http://hdl.handle.net/10.1080/13691066.2011.600278
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    References listed on IDEAS

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    1. Joshua Lerner, 2002. "Boom and bust in the venture capital industry and the impact on innovation," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 25-39.
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