IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/halshs-00468598.html
   My bibliography  Save this paper

Affiliated and independent venture capitalists: early stages screening and the syndication / leverage trade-off

Author

Listed:
  • Eric Nasica

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

  • Dominique Torre

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

Abstract

The topic of this paper is to analyze comparatively the interest and the advantages of the existence of heterogeneous institutions in the Venture Capital activity. We focus on the duality relevant in Europe between Independent Venture Capitalists and the Bank-Affiliated ones. We first discuss in the second section the different characteristics of these institutions and their comparative advantages in screening and financing risky projects. We then develop a theoretical model which analyses comparatively the two technologies: both IVCs and AVCs take the asymmetric risk in seed and are backed by hedge funds equity or banks at the second round. IVCs syndicate and AVCs use the internal ways of diversification of the bank. Screening technologies are activated in seed and symmetric risks managed during the development phase. We obtain analytical results conform to intuition in the analytical part of the model and concerning the relative advantages and deficits of the two systems. With a specified form, we analyze the coordination of their intervention on given range of variation of the risks (and return). We find that different cases are possible. In some circumstances, IVCs and AVCs naturally intervene on different classes of risk but in other cases they compete on the same ones. The more astonishing observation is that one may observe situations where the two institutions choose to eliminate the projects corresponding to intermediate levels of risk and to finance the projects with low or high levels of risk.

Suggested Citation

  • Eric Nasica & Dominique Torre, 2008. "Affiliated and independent venture capitalists: early stages screening and the syndication / leverage trade-off," Working Papers halshs-00468598, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00468598
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00468598
    as

    Download full text from publisher

    File URL: https://halshs.archives-ouvertes.fr/halshs-00468598/document
    Download Restriction: no

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00468598. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.