New Venture Value Creation in Syndicates Between Independent and Corporate Investors

Abstract

Consistent with the resource-based view research on investment syndicates indicates relative performance advantages of syndicate-backed ventures. However, in line with agency theory, the literature shows that heterogeneous syndicates between independent venture capital (IVC) and corporate venture capital (CVC) produce portfolio firms that exert only marginal growth and are less likely to exit successfully. These contrasting views motivate this study, which aims to shed light on the determinants of value creation for new venture firms in IVC–CVC co-investing. Our qualitative research builds on a cross-industry sample of 35 interviewees identifying a distinctive set of value drivers comprising shareholder relationships, corporate setup, venture life cycle, and deal terms.

Harmonizing corporate venturing dimensions and its characteristics: a systematic analysis

“…The dimension of intermediation in CV was described by Gutmann (2018) solely as a structural dimension for financial investments, typically regarding CVCs, while our in-depth analysis shows a broader and more complex concept. We add to this topic the role of internal relationships and processes (Siegel et al 1988;Souitaris and Zerbinati 2014), partnerships with external parties (Keil 2000;Balz et al 2022), and non-financial intermediation (Kanbach and Stubner 2016). In total, 37 papers from our sample relate to intermediation in their work.…”

“…The last and new dimension is called the development stage of start-ups, referred to in 30 out of 100 studies. The interpretation and definition of different startup stages are either based on general milestones such as financing rounds (Rossi et al 2020b;Balz et al 2022) and business activities (Thornhill and Amit 2001) or on more finegrained classifications like strategic clarity (Covin et al 2020) or the first launch of a product within earlier stages (Puranam et al 2006) (Table 2).…”

“…From our sample of studies, the characterization based on the financing round was only found in CVC literature. Balz et al (2022) identified the series A financing round as critical in the context of CVC-IVC value-creation for startups. If the startup is in a prior stage, referred to as the "pre-revenue seed stage" (Balz et al 2022), the corporate can potentially support the venture with its product-market fit.…”

“…Balz et al (2022) identified the series A financing round as critical in the context of CVC-IVC value-creation for startups. If the startup is in a prior stage, referred to as the "pre-revenue seed stage" (Balz et al 2022), the corporate can potentially support the venture with its product-market fit. However, the risks of unequal power distribution could also be harmful.…”

“…The dimension also impacts the time horizon, as more developed startups typically need less time for further development (Enkel and Sagmeister 2020), which also highlights its importance for providing adequate support and giving enough operational and strategic autonomy to ventures (Johnson 2012;Covin et al 2020). In the CVC literature stream, the definition of development stages is based on the financing round, considering pre-seed and seed financing rounds as early, round A as middle, and all following as late stages (Rossi et al 2020b;Balz et al 2022), scholars from other fields define the stages based on performance results, such as the first year of receiving financial investment as the early stage, starting to generate revenues as mid-stage and becoming profitable as established stage (Thornhill and Amit 2001;Johnson 2012).…”