Syndicating Venture Capital Investments : An Integrated Benefit/Cost Framework and Analysis

This paper focuses on the syndication of venture capital investments. We present a comprehensive framework that simultaneously integrates the benefits and drawbacks of syndication. Our empirical analysis uses a sample of UK venture capitalists' investments made between 1964 and 2006. We collected data about three different units of analysis: venture capital firm level, portfolio company level and investment round level. Overall, we find evidence for the main motivations to syndicate, namely the finance, resource based and deal flow rationales. Furthermore, indirect support for the window dressing and agency problem motives is established. We also confirm the importance of transaction costs. Hence, VCs' syndication decisions are driven by the benefits and costs of syndication