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Passive syndicates and risk in venture capital investments

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  • George Geronikolaou

Abstract

This paper presents a model in which a budget‐constrained venture capital investor forms a syndicate and coinvests in a risky project. Assuming that syndication ameliorates competition among investors and that investee's outside option increases with investor competition, the model predicts that even if follower syndicate members are passive and do not add value to the project, the size of the syndicate is positively related to the maximum risk that the lead venture capital investor can tolerate.

Suggested Citation

  • George Geronikolaou, 2022. "Passive syndicates and risk in venture capital investments," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2033-2037, September.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:6:p:2033-2037
    DOI: 10.1002/mde.3506
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    References listed on IDEAS

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