Birds of a feather or celebrating differences? The formation and impacts of venture capital syndication

This paper examines the preferences of venture capital firms for syndication partners and the impacts of syndication partners on venture capital firms. Co-investing with similar partners may reduce transaction costs, but it may also limit opportunities for learning. Based on U.S. data on venture capital investments, I find that, on average, venture capital firms are more likely to syndicate with partners that are similar to them, consistent with prior theoretical predictions. In the long term, however, venture capital firms may benefit more from co-investing with partners that are different from them.