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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/28422

Title: The First Deal Might Be The Last: Building Long Term Relationships In The Venture Capital Community
Authors: Campo-Rembado, Miguel Angel - NYU Stern School of Business
Issue Date: 2005
Series/Report no.: NET Institute Working Paper;05-11
Abstract: Previous analysis of venture capital activity in Silicon Valley has highlighted the role of venture capital syndication as a mechanism through which venture capitalists (VCs) build trusting relationships within the investment venture capital community. But what are the dynamic properties of the resulting network? This paper analyzes the dynamics of syndicated deals in technology sectors. The results suggest that VCs build reputation by committing to provide future funds in a staged deal and honoring their commitment. Reputation increases cooperation, in terms of access to 'deal flow'. The commitment to provide future funding, however, is expensive in terms of the opportunity costs associated with a reduction in the number of new startups in which they can participate. The reputation system is enforced by established VCs, who have more exposure to the 'deal flow'.
URI: http://hdl.handle.net/2451/28422
Appears in Collections:NET Institute Working Papers Series

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