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Does family matter? Venture capital cross-fund cash flows

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  • Kräussl, Roman
  • Rinne, Kalle
  • Sunc, Huizhu

Abstract

Venture capital (VC) funds backed by large multi-fund families tend to perform substantially better due to cross-fund cash flows (CFCFs), a liquidity support mechanism provided by matching distributions and capital calls within a VC fund family. The dynamics of this mechanism coincide with the sensitivity of different stage projects owing to market liquidity conditions. We find that the early-stage funds demand relatively more intra-family CFCFs than later-stage funds during liquidity stress periods. We show that the liquidity improvement based on the timing of CFCF allocation reflects how fund families arrange internal liquidity provision and explains a large part of their outperformance.

Suggested Citation

  • Kräussl, Roman & Rinne, Kalle & Sunc, Huizhu, 2023. "Does family matter? Venture capital cross-fund cash flows," CFS Working Paper Series 695, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:695
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    References listed on IDEAS

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    More about this item

    Keywords

    Venture capital; Fund family; Subsidization; Liquidity; Performance;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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