A Longitudinal Study on the Impact of Venture Capital Firm Heterogeneity on Portfolio Company Growth

Although scholars agree that not all partners are equal, it remains unclear whether companies will particularly benefit from forming relationships with more experienced or more legitimate firms. This study examines the impact of venture capital firm experience and legitimacy on portfolio company growth. For this purpose, I track 94 companies forming initial investment relationships with venture capital firms for up to five years after the initial investment. Linear Mixed Models (LMMs) are used to gain more insight into the non-linear growth trajectories of portfolio companies. Findings indicate that both companies backed by venture capital firms with more industry experience, but not overall experience, and companies backed by more legitimate venture capital firms exhibit higher growth curves.