|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26553
|
| Title: | Who You Know Matters: Venture Capital Networks and Investment Performance |
| Authors: | Hochberg, Yael
Ljungqvist, Alexander
Lu, Yang |
| Issue Date: | 8-Dec-2004 |
| Series/Report no.: | FIN-04-029 |
| Abstract: | Many financial markets are characterized by strong relationships and
networks, rather than arm’s-length, spot-market transactions. We
examine the performance consequences of this organizational choice in
the context of relationships established when VCs syndicate portfolio
company investments, using a comprehensive sample of U.S. based VCs over
the period 1980 to 2003. VC funds whose parent firms enjoy more
influential network positions have significantly better performance, as
measured by the proportion of portfolio company investments that are
successfully exited through an initial public offering or a sale to
another company. Similarly, the portfolio companies of better networked
VC firms are significantly more likely to survive to subsequent rounds
of financing and to eventual exit. The magnitude of these effects is
economically large, and is robust to a wide range of specifications. Our
models suggest that the benefits of being associated with a
well-connected VC are more pronounced in later funding rounds. Once we
control for network effects in our models of fund and portfolio company
performance, the importance of how much investment experience a VC has
is reduced, and in some specifications, eliminated. |
| URI: | http://hdl.handle.net/2451/26553 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
