Venture Capital Syndication in Times of Economic Crisis

This study analyzes the effects of the 2000-2001 dot-com crisis and the 2008-2009 financial crisis on venture capital syndication. Using propensity score matching analysis, we show that during the two crises, VCFs had a lower tendency to syndicate their investments, and the size of the syndicates was smaller. This effect is found to be stronger for later-stage financing than for early-stage financing. We explain the lower propensity to syndicate and the reduction in syndicate size by the existence of fewer exit opportunities for venture capital firms and a lower supply of funds for the venture capital industry. Implications for venture capital firms and start-up firms are discussed