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How do Vc Syndicates Affect Venture Performance


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1 Department of Finance, College of Business, University of Illinois - Urbana Champaign, 340 Wohlers Hall, 1206 South Sixth Street, Champaign IL, 61820
     

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Syndicates are good but not always. VC syndication is widely prevalent in entrepreneurial financing and also a well-researched area. A good number of studies have looked into the benefits attached to them while enumerating the various factors that lead to the positive outcome. There have been few studies far in between that hinted towards the negative side of syndication. However, to prove the conditions under which the syndication might not be such a good idea, a detailed study is required to be done. In this paper, I have presented a modified version of well-known model in game theory to drive the important conditions that could lead to sub-optimal venture performance in a syndicate. Syndication with large number of partners, entering the later rounds of financing, already overseeing big portfolio of existing investments do not add significant value to the ventures and turn out to exhibit rather sub-optimal performance.

Keywords

Venture Capital, Syndication, Venture Performance, Applied Game Theory
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  • How do Vc Syndicates Affect Venture Performance

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Authors

Charu Agarwal
Department of Finance, College of Business, University of Illinois - Urbana Champaign, 340 Wohlers Hall, 1206 South Sixth Street, Champaign IL, 61820

Abstract


Syndicates are good but not always. VC syndication is widely prevalent in entrepreneurial financing and also a well-researched area. A good number of studies have looked into the benefits attached to them while enumerating the various factors that lead to the positive outcome. There have been few studies far in between that hinted towards the negative side of syndication. However, to prove the conditions under which the syndication might not be such a good idea, a detailed study is required to be done. In this paper, I have presented a modified version of well-known model in game theory to drive the important conditions that could lead to sub-optimal venture performance in a syndicate. Syndication with large number of partners, entering the later rounds of financing, already overseeing big portfolio of existing investments do not add significant value to the ventures and turn out to exhibit rather sub-optimal performance.

Keywords


Venture Capital, Syndication, Venture Performance, Applied Game Theory

References