Experience, screening and syndication in venture capital investments

Casamatta, Catherine; Haritchabalet, Carole

doi:10.1016/j.jfi.2007.03.003

Cited by 237 publications

(166 citation statements)

References 42 publications

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“…Moreover, we document that foreign VCs who lack general and withincountry experience have the chance to join a local VC only if this local VC also is inexperienced, while experienced local VCs require large experience from their syndication partners. This finding is consistent with the recent theoretical literature on syndication behavior, which suggests that more experienced VCs choose more experienced syndication partners (Casamatta andHaritchabalet 2007, Cestone et al 2007). …”

Section: Introductionsupporting

confidence: 91%

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

Tykvová¹,

Schertler²

2011

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp11022.pdf Non-Technical SummaryIn the last decade, more than one third of worldwide venture capital investments have been crossborder deals. with an inexperienced local venture capitalist may be a successful way for inexperienced foreign venture capitalists to overcome the obstacles of geographical and institutional distances. This result of our analysis is of particular relevance for venture capitalists with small experience who want to expand their activities beyond their countries' borders but who do not (yet) have direct access to deals in foreign countries. These investors may start their international expansion via syndication with inexperienced local venture capitalists in small deals. In the course of time, as they become more and more experienced and possess better contacts to other venture capitalists through repeated interactions, they may not only gain access to cross-border deals on their own but they may also be able to invest in larger deals and to join cross-border syndicates led by more experienced venture capitalists. Drawing on a novel dataset of worldwide venture capital deals, we investigate how venture capitalists (VCs) overcome the complexity of investing in geographically and institutionally distant regions. Our results indicate that syndicating with local VCs is a common way for foreign VCs to gain deal access, overcome the complexity of investing in distant regions and offset their lack of within-country experience. The foreign VC's distance from the portfolio company ceases to be a serious investment obstacle when he can rely on a highly experienced local VC. Our results further suggest that inexperienced VCs, i.e. those VCs with a large need for syndication, increase their chances to invest across borders when they invest in small deals jointly with local inexperienced partners. Das Wichtigste in Kürze

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Section: Introductionsupporting

confidence: 91%

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

Tykvová¹,

Schertler²

2011

SSRN Journal

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“…Interdependence of the VCFs for resource exchange which drives syndication allows the VCFs to pool expertise and experience in venture selection and investment risk reduction as well as portfolio risk diversification (Hopp & Rieder, 2011;Hoppe & Lukas, 2014). Repeat co-investment and collaboration among the firms can take the VCs beyond arm-length transactions to a network of relationships which could help VCs accumulate social capital and build reputation (Kilduff & Brass, 2010;Casamatta & Haritchabalet, 2007). Gu and Lu (2014) consider reputation as an intangible organizational asset for VCFs which is represented by past performances.…”

Section: Discussionmentioning

confidence: 99%

Venture Capital Firms’ Specialization, Differences and Complementarities

Siddiqui¹,

Hossain²

2016

IJBM

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The paper analyses the differences in venture capital (VC) firms, proposes a classification of the firms and empirically investigates their investment and co-investment behaviour. The VC firms are not homogeneous and beside funds they possess a diverse set of nonfinancial resources which they optimize. A classification is developed based on VC firm resources and specialization represented by organizational form and affiliation. Based on Australian market data, we classify the VC firms in three categories, namely strategic, financial and independent using resource based theory, and highlight differences. Then the firms' specialization is related to their portfolio characteristics to identify and analyse differences and complementarities in terms of investment strategies. The influence of specialization in investment and co-investment strategies is also analysed. This study shows that specialization influences investment decisions and co-investor selection. Implications of such investment practices on resource efficiency, financial viability and transition to sustainability are also discussed.

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“…While, several motives for syndication have been advanced, in general, it is well understood that syndication arises from the need for risk reduction via pooling of tangible and non-tangible resources, culminating in better selection and management of investments (Casamatta and Haritchabalet, 2007;) ultimately resulting in an enhanced venture valuation (Hellman and Puri, 2002). At large, the core motivation for syndication is the need to leverage 'external' social capital (Sorenson and Stuart, 2008).…”

Section: Deal Syndicationmentioning

confidence: 99%

Managing the risks from high-tech Investments in India: differential strategies of foreign and domestic venture capital firms

Joshi

2018

J Glob Entrepr Res

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The field of technology investing is ridden with dire risks, particularly the ones arising from the presence of asymmetric information among venture capital firms (VCs) and entrepreneurs. The objective of this paper, is to assess the differential strategies devised by the high-technology focused foreign VCs and domestic VCs in negotiating the information risks encountered by them. The sample for the study comprises 70 active VC firms -both foreign and domestic drawn from the Venture Intelligence database. Using the theoretical framework of resource-based view and transactions costs theory and the non-linear data mining technique of Classification and Regression Trees (CART), we first segregate segments of foreign VCs and domestic VCs exhibiting the highest technology focus. Further, we profile each of these segments and compare and explain the differences in the risk management strategies pursued by them. The results from this paper bring to light several interesting findings. To start with, all high-tech focused foreign VCs are not uniform with regards of the risk-management strategies deployed by them. In general, foreign VCs rely on domain specialization, deep sector knowledge and geographic location within India as primary mechanisms of managing information risks. On the contrary, for high-tech focused domestic VCs syndicating with other specialized VCs combined with the opportunity recognition potential of their investment executives with erstwhile founding experience emerges as the core risk-control strategy.

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Experience, screening and syndication in venture capital investments

Cited by 237 publications

References 42 publications

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

Venture Capital Firms’ Specialization, Differences and Complementarities

Managing the risks from high-tech Investments in India: differential strategies of foreign and domestic venture capital firms

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