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Competition Syndication And Entry In The Venture Capital Market
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Book Synopsis Competition, Syndication, and Entry in the Venture Capital Market by : Suting Hong
Download or read book Competition, Syndication, and Entry in the Venture Capital Market written by Suting Hong and published by . This book was released on 2013 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: There are two ways for a venture capital (VC) firm to enter a new market: initiate a new deal or form a syndicate with an incumbent. Both types of entry are extensively observed in the data. In this paper, I examine (i) the causes of syndication between entrant and incumbent VC firms, (ii) the impact of entry on VC contract terms and survival rates of VC-backed start-up companies, and (iii) the effect of syndication between entrant and incumbent VC firms on the competition in the VC market and the outcomes of incumbent-backed ventures. By developing a theoretical model featuring endogenous matching and coalition formation in the VC market, I show that an incumbent VC firm may strategically form syndicates with entrants to maintain its bargaining power. Furthermore, an incumbent VC firm is less likely to syndicate with entrants as the incumbent's expertise increases. I find that entry increases the likelihood of survival for incumbent-backed start-up companies while syndication between entrants and incumbents dampens the competitive effect of entry. Using a data set of VC-backed investments in the U.S. between year 1990 and 2006, I find empirical evidence that is consistent with the theoretical predictions. The estimation results remain robust after I control for the endogeneity of entry and syndication.
Book Synopsis Essays on the Venture Capital Market by : Suting Hong
Download or read book Essays on the Venture Capital Market written by Suting Hong and published by . This book was released on 2014 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: There are two ways for a venture capital (VC) firm to enter a new market: initiate a new deal or form a syndicate with an incumbent. Both types of entry events are extensively observed in the data. This dissertation examines (i) the causes of syndication between entrant and incumbent VC firms, (ii) the impact of entry on VC contract terms and survival rates of VC-backed start-up companies, and (iii) the effect of syndication between entrant and incumbent VC firms on the competition in the VC market and the outcomes of incumbent-backed ventures. This dissertation contributes to the existing literature by developing an analytical framework to examine the strategic interactions between entrant and incumbent VC firms, and to investigate the impact of VC firms' entry and syndication on the survival of VC-backed start-ups. The baseline model characterizes the endogenous matching between entrepreneurs and VC firms. In particular, the model captures the following salient features of the VC market: (i) bilateral negotiations between VC firms and entrepreneurs, and (ii) interdependent negotiations of different pairs of VC firms and entrepreneurs. By extending the baseline model to allow for coalition formation among VC firms, this dissertation explores the motive of VC firms to syndicate. Consistent with the empirical observation, the model shows an incumbent VC firm may strategically form syndicates with entrants to maintain its bargaining power. The theoretical analysis provides the following predictions. First, an incumbent VC firm is less likely to syndicate with entrants as the incumbent's expertise increases. Second, entry of VC firms increases the likelihood of survival for incumbent-backed start-up companies, while syndication between entrants and incumbents dampens the competitive effect of entry. Using a data set of VC-backed investments in the U.S. between year 1990 and 2006, this dissertation provides empirical evidence that is consistent with the theoretical predictions. To control for the endogeneity of VC firms' entry and syndication, this dissertation follows instrumental variable approach, and the estimation results remain robust.
Book Synopsis Learning and Syndication in Venture Capital Investments by : Catherine Casamatta
Download or read book Learning and Syndication in Venture Capital Investments written by Catherine Casamatta and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Syndication of Venture Capital Investments by : Finn Rieder
Download or read book Syndication of Venture Capital Investments written by Finn Rieder and published by diplom.de. This book was released on 2003-09-03 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Abstract: Cooperation among financial institutions is a persistent feature of the equity issuance process. Also, the syndication of venture capital investments is common practice among venture capitalists. Despite the importance of syndication, surprisingly little is known on the motives and structure of syndication. Further-more, there is hardly any empirical evidence for Europe or particularly Germany on the syndication behaviour of VC organisations and the factors influencing their overall propensity to co-invest. On the one hand, the purpose of this paper is to compile and summarise all aspects of the existing theory on VC syndication. Therefore, the evidence from the few empirical studies that were so far carried out on this topic is discussed. Thus, the general theory on syndication, which is thought to be independent from peculiar VC industries, serves as the framework throughout this paper which is complemented by the results of the empirical analyses done so far by different authors. On the other hand, this text has also an explorative component where it is analysed if and to what degree findings of the existing studies also hold for the German VC market. This analysis is done by the use of a data base listing a total of 3,230 VC investments in German portfolio companies. The nature of the data base at hand is not designed to allow for conclusions on all relevant aspects of syndication. But the claim of this paper is to use and analyse it whenever it is possible and the data base can be linked to aspects on syndication discussed throughout the different chapters. Firstly, this paper gives a theoretical overview on general motives behind VC syndication which leads to a discussion which rational is more important in explaining VC syndicates and if there are differences between the North American and European VC market with regards to this. Then, as the principal part of this paper, various factors influencing the propensity of VC investors to syndicate are analysed and, whenever possible and appropriate, also reviewed based on the data base. The next part examines the process of forming and managing a syndicate, after the decision to co-invest a deal was made built upon the motives and factors of influence, and to what extent networking activities play a role in it. After this, it is discussed if syndicates enhance the firm value If the portfolio company and whether there is a difference between the value added of syndicates [...]
Book Synopsis The Money of Invention by : Paul Alan Gompers
Download or read book The Money of Invention written by Paul Alan Gompers and published by Harvard Business Press. This book was released on 2001 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt: When the economy was booming and dot-coms were flying high, venture capitalists were admired as impresarios of innovation. Then the market tanked, start-ups fizzled, and those same deal-makers were rebuked as predators out for a quick score. So which portrayal is accurate? Where is this much-hyped industry heading? And what will it mean for the future of innovation in the global economy? In this definitive book, industry experts Paul Gompers and Josh Lerner provide the first cool-headed explanation of the venture capital industry and the role it plays in our economy. They underscore that, regardless of the economic conditions, innovation is incredibly difficult to finance, take to market, and translate into value. While venture capital has evolved to address these problems-the industry has fueled innovation, economic growth, and wealth creation for decades-features of the venture industry have left it vulnerable to boom-and-bust cycles. In the near future, say the authors, the industry must transform dramatically, with important implications for industry players and the entrepreneurs and organizations they serve. Drawing from compelling research and industry "war stories," Gompers and Lerner present a series of practical frameworks for understanding the relationships among venture capital, innovation, and entrepreneurial success. They demystify how the venture capital world operates, and outline the opportunities and obstacles faced by all players in this evolving arena. They explore: · The problems entrepreneurs encounter in securing financing, and how the venture capital model can help innovators to resolve them · How venture capitalists can effectively pursue promising opportunities while building a sustainable franchise · How corporations, nonprofits, and government institutions can harness the power-and avoid the pitfalls-of the venture capital model when applying it in their own sectors Whether the industry is enjoying an incredible growth spurt or weathering an economic slowdown, readers will find this book an immensely practical guide to leveraging the venture capital model to turn innovation into value. Paul A. Gompersis a Professor of Business Administration and a Director of Research at Harvard Business School.Josh Lerneris a Professor of Business Administration at Harvard Business School. Both authors live in the Boston area.
Book Synopsis Market Reputation, Innovation Or Synergistic Partnerships, and Syndication Activities Within Venture Capital Markets by : Oghenovo A. Obrimah
Download or read book Market Reputation, Innovation Or Synergistic Partnerships, and Syndication Activities Within Venture Capital Markets written by Oghenovo A. Obrimah and published by . This book was released on 2018 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Absent superior performance with respect to 'Portfolio Innovation Focus' (unexpected innovation), this study finds 'less experienced' ('competing') VCs, which only coinvest with other less experienced VCs, become less reputable than alternate less experienced ('non-competing') VCs who coinvest with experienced VCs. The empirical evidence demonstrates innovation focus of non-competing VCs' syndicates are premised on demand for expertise of experienced VCs, and not influenced by syndicate size. Consistent with network size rationales for syndication, quid-pro-quo benefits of syndicate size enhance innovation focus within syndicates comprising of competing VCs. Applications of the single crossing property provide empirical evidence that differences between portfolios of non-competing and competing VCs are compatible with existence of Nash equilibriums, and heterogeneity in preferences. This study is first to empirically dichotomize and demonstrate coexistence of 'expertise' and 'quid-pro-quo' rationales for syndication in context of populations of cohort VCs operating within venture capital markets.
Book Synopsis Venture Capital at the Crossroads by : William D. Bygrave
Download or read book Venture Capital at the Crossroads written by William D. Bygrave and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Venture capital (VC) has had a profound impact on the U.S and world economies. The landmarks of venture capitalism are the formation of the venture capital fund ARD in 1946 and the establishment of small business investment companies by the U.S. Small Business Administration in 1958. After a boom in the 1960s, the VC industry all but collapsed between 1970 and 1977. The VC industry revived in the 1980s and reached a peak in 1987 from which it declined. At the moment of its decline in 1990, the industry was radically altered and transformed and was at a crossroads from its recent shake-out. This book examines the state of the VC industry at this point in 1990, examining current trends, developments, and practices, and looking at future prospects for the industry, suppliers, and users of risk capital, as well as the nation's economy as a whole. The VC industry has been transformed by two changes. (1) New and specialized financial and investment strategies emphasize deal making, transaction crafting and closing, fee generating, and short-term gains. This "merchant capital" approach is oriented to investing in established firms, as opposed to the classic VC approach of providing equity financing in new, emerging, innovating, and technology-based firms. This change may be due to professionals entering the field from MBA backgrounds rather than business-building backgrounds. (2) The altered market has resulted in reduced opportunities, globalization, increase in available capital, and dominance of institutional money, and the VC industry is losing its classic company-building skills. The major virtue of the traditional VC industry, which has been a wellspring of innovation and great rewards, is the skills brought by the venture capitalists that add value in the firm's forming, building, and harvesting. Changes in the VC industry are seen in an explosion of investing activity, heterogeneity of industry structure, niche funds, declines in rate of return, and increased competition and shake-out. Examples of classic revolutionary industries financed by VC are the semiconductor, computer, and biotechnology industries. Some lessons from these industries are drawn. Lessons are also drawn from the case of the Winchester disc-drive industry, which represents a case of "capital market myopia." Historical VC returns have been in the 10% to 20% range, occasionally in the 20% to 30% range, and rarely higher. The main reason for the unsatisfactory returns on VC since 1983 has been the initial public offering (IPO) drought. The benefits and implications for the VC industry of syndicated investments are examined. The contribution of VC to economic development is explored in terms of internal and external factors. Some high-tech regions were not planned; some planned regional centers have failed. Three factors affect the flow of VC: investors who put up the money, entrepreneurs who form the company, and the venture capitalists. The value-added of classic VC investment lies in the guidance, contracts, know-how, and support of the backers. The relationship between the venture capitalist and management team critically affects the success of the venture. Also examined are relationships between flows of VC and public policy, capital markets, new technologies, and changes in industries. Most important in fostering VC are government policies. Since VC is vital element to entrepreneurship, the U.S. must actively foster classic venture capital by changing some national attitudes and policies in culture, education, and role of government, for which recommendations and suggestions are offered. (TNM).
Book Synopsis The Oxford Handbook of Venture Capital by : Douglas Cumming
Download or read book The Oxford Handbook of Venture Capital written by Douglas Cumming and published by Oxford University Press. This book was released on 2012-04-24 with total page 1052 pages. Available in PDF, EPUB and Kindle. Book excerpt: Venture capital (VC) refers to investments provided to early-stage, innovative, and high growth start-up companies. A common characteristic of all venture capital investments is that investee companies do not have cash flows to pay interest on debt or dividends on equity. Rather, investments are made with a view towards capital gain on exit. The most sought after exit routes are an initial public offering (IPO), where a company lists on a stock exchange for the first time, and an acquisition exit (trade sale), where the company is sold in entirety to another company. However, VCs often exit their investments by secondary sales, wherein the entrepreneur retains his or her share but the VC sells to another company or investor buybacks, where the entrepreneur repurchases the VC`s interest and write-offs (liquidations). The Oxford Handbook of Venture Capital provides a comprehensive picture of all the issues dealing with the structure, governance, and performance of venture capital from a global perspective. The handbook comprises contributions from 55 authors currently based in 12 different countries.
Book Synopsis Co-investment and Competition by : Demetrius P. Lewis
Download or read book Co-investment and Competition written by Demetrius P. Lewis and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "Network Structure and Uncertainty" develops and tests a theory of tie maintenance under environmental uncertainty. Sociological theory of networks indicates that firms benefit from strengthening existing ties, as well as forming new ones. However, this research often overlooks network effects that are contingent on the environment. In this paper, I posit that under greater uncertainty, stronger ties provide better information and facilitate collective action. As uncertainty wanes, stronger ties entail an opportunity cost of redundant information and misallocated social capital. I test this theory using data on venture capital co-investment and startup company performance from 1981-2014. My results indicate that venture capitalists with many strong ties are more successful in early-stage ventures and ventures in emerging industries. This success attenuates for later-stage ventures and ventures in mature industries, and strong ties may actually be detrimental. I supplement my empirical analysis with qualitative interviews to better understand how venture capitalists mobilize support from co-investors under uncertainty. "Network Imprinting and Variability" exposits a theory of firm entry and network imprinting. Existing networks literature indicates that firms positioned in the center of a market's social network are more capable and have better access to resources. What results is a Matthew effect where the more central firms have access to better resources and can thus sustain outstanding performance for new firms entering a network. The closer to the center firms enter, the better they should perform. In this paper, I posit that new firms entering at the center of a pre-existing network are not necessarily better off, nor are the firms that enter at the periphery strictly worse off. Instead, firms that enter into the center are subject to both middle status conformity and learning myopia that leads to exploitation. On the other hand, firms that enter into the periphery develop an orientation toward external search that motivates them to be explorers. I test this theory using data on the co-investment networks of venture capital firms collected from 1981 to 2014. My results indicate that venture capital firms that enter into the center of the network experience are less likely to die, but are also less likely to have extreme success. The converse is true for firms that enter into the periphery. I supplement my empirical analysis with qualitative interviews with venture capitalists to better understand the micro mechanisms at work. "Network Mobility and Performance" builds a theory linking network mobility to firm outcomes. Sociological research on networks has developed theory that relates network positions to outcomes. However, less work explicitly draws attention to changing network positions over time, and how these shifts on their own can influence performance. I argue that certain patterns of mobility will lead firms to success, while others will lead to failure. I focus on the particular situation in which firms are able to begin life in the periphery, and then gain access to the center and are able to relocate there. Firms that may appear to have the same network position, as well as similar previous records of success, may appear the same in cross-section. But, considering the path each firm travels to get to its current position can help make predictions about its performance trajectory. I develop a theoretical example focusing on venture capital firms that enter into the periphery of the co-investment network and in subsequent periods are able to invest with more central co-investors.
Book Synopsis Venture Capital Contracts and Market Structure by : Roman Inderst
Download or read book Venture Capital Contracts and Market Structure written by Roman Inderst and published by . This book was released on 2002 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis From Value-added VCs to Equity Crowdfunding Syndicates by : Louis Coppey
Download or read book From Value-added VCs to Equity Crowdfunding Syndicates written by Louis Coppey and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: "If you look at the venture business, for an industry that funds innovation - it really doesn't have that much", declared Josh Kopelman, founding partner at First Round Capital, in 2013. Notwithstanding, observing the industry in the last decade, one can identify at least two evolutions. First, a new generation of VC firms, to which First Round Capital belongs, has emerged and is reinventing VC firms' traditional organization to offer additional services beyond investment capital and their partners' time. Second, equity crowdfunding, spearheaded by equity crowdfunding syndicates, now allows entrepreneurs to raise funds entirely online and has become an interesting alternative to traditional venture capital. This paper's first objective is to describe and evaluate the strategies embraced by these new types of value-added VC firms. The second objective is to review online syndicates' characteristics and their evolution since their inception 3 years ago. I first consider whether they can become credible competitors of VC firms and end with a few predictions regarding the space equity crowdfunding syndicates are likely to occupy. I show that the new emphasis placed on VC firms' value added services has empowered new entrants in the VC market, enabling them to break into the concentrated circle of the very few VC firms actually earning significant returns. Beyond the objective of improving their portfolio companies' operating performance, I show that VC firms embrace this strategy in order to 1) increase the size of their inbound deal flow, 2) improve the firm's brand and 3) provide General Partners with additional arguments to close competitive deals. In a second part, I argue that online syndicates could increasingly embrace the key success factors shared among successful venture capital firms. However, their lack of reputation may undermine their performance in the next venture capital cycle. I conclude that equity crowdfunding syndicates are primarily an interesting addition to the traditional early-stage industry, rather than a substitute for traditional VC firms. Lastly, I show how VC investors can take advantage of online syndicates to increase their firms' competitiveness.
Book Synopsis Killers on the Road of Emerging Start-Ups - Implications for Market Entry and Venture Capital Financing by : Heli A. Koski
Download or read book Killers on the Road of Emerging Start-Ups - Implications for Market Entry and Venture Capital Financing written by Heli A. Koski and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The competitive effects of acquisitions made by large US-based technology companies have come under increased regulatory scrutiny over recent years because their acquisition patterns have been viewed as potentially harming competition. This paper studies the impact of acquisitions by large US-based technology companies on the entry dynamics and venture capital financing in their target product markets. We use data from Crunchbase, a start-up directory listing more than 700,000 start-up companies from 742 product markets globally, distinguishing the US and European markets for 2003-2018. Our difference-in-differences estimation results suggest that the technology giants' buyouts subsequently reduced market entry rates and decreased the available venture capital funding in the product markets of the acquired companies. The acquisitions of technology giants seem to generate a so-called “kill zone,” which dissuades the market entry of new companies. The kill zone effect is intense and evident in the product markets close to the data giants' core business areas, where the technology companies have the best prospects of exploiting their existing (consumer) data and competence. We do not find any short-term decline in the market entry or venture capital finance after the data giants' first acquisitions in unconnected markets. In these markets, though, the data giants seem to build up entry barriers in the longer run through their acquisitions. These findings highlight the negative long-term consequences of the tech giants' increased market power through their acquisition behavior in relation to firm entry, competition, and innovation in technology-intensive markets.
Book Synopsis Handbook of Research on Venture Capital by : Hans Landstr”m
Download or read book Handbook of Research on Venture Capital written by Hans Landstr”m and published by Edward Elgar Publishing. This book was released on 2012-01-01 with total page 305 pages. Available in PDF, EPUB and Kindle. Book excerpt: ÔThis exciting second volume of cutting-edge research on venture capital takes up where volume one leaves off, bringing greater depth to topics covered in the first volume (such as angel investing) and adding new topics and insights. It poses interesting questions such as Ð Is venture capital in crisis? Are new models of early investing needed? Ð and offers carefully researched answers. Landstršm and Mason provide insightful commentary and skillfully pinpoint the contributions of a talented set of researchers. Both scholars and practitioners of venture capital will want to read this book.Õ Ð Harry J. Sapienza, University of Minnesota, US ÔThe second edition of the Handbook of Research on Venture Capital provides an important guidepost for venture capital researchers. As Landstršm and Mason point out, the nature of venture capital has changed dramatically over the last ten years. The asset class as a whole has failed to return principal and the old model is under tremendous strain. The contributors nicely highlight many of these changes, especially how venture capital has scaled beyond the US. For those of us active in venture capital research, the chapters raise many interesting research questions that deserve further attention.Õ Ð Andrew Zacharakis, Babson College, US This Handbook charts the development of venture capital research in light of the global financial crisis, starting with an analysis of the current venture capital market and the changing nature of the business angel market. Looking at governance structures, the performance of venture capitalists in terms of investments, economic impact and human capital, and the geographical organization of business angels and venture capital global ÔhotspotsÕ, this book also analyses the current state of venture capital research and offers a roadmap for the future.
Download or read book VC written by Tom Nicholas and published by Harvard University Press. This book was released on 2019-06-03 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: From nineteenth-century whaling to a multitude of firms pursuing entrepreneurial finance today, venture finance reflects a deep-seated tradition in the deployment of risk capital in the United States. Tom Nicholas’s history of the venture capital industry offers a roller coaster ride through America’s ongoing pursuit of financial gain.
Book Synopsis The Venture Capital Cycle by : Paul Alan Gompers
Download or read book The Venture Capital Cycle written by Paul Alan Gompers and published by MIT Press. This book was released on 2004 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt: An analysis of the venture capital process, from fund-raising through investing to exiting investments; a new edition with major revisions and six new chapters that reflect the latest research.
Book Synopsis The Syndication Network and Deal Flow of Venture Capital Firms by : Malte Brettel
Download or read book The Syndication Network and Deal Flow of Venture Capital Firms written by Malte Brettel and published by . This book was released on 2007 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the positions that Venture Capital firms hold in a syndication network and determines the effect that network positions have on generating deal flow quantity and quality. Using data on syndicated investments in the German venture capital market and data on the deal flow of the firms, we show that those firms that hold network positions characterized by network openness have a higher deal flow quantity and quality.
Book Synopsis The Oxford Handbook of Private Equity by : Douglas Cumming
Download or read book The Oxford Handbook of Private Equity written by Douglas Cumming and published by OUP USA. This book was released on 2012-03-22 with total page 769 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Handbook provides a comprehensive picture of the issues surrounding the structure, governance, and performance of private equity.
