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Fund size and the syndication of venture capital investments

Author

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  • Miwako Nitani
  • Allan Riding*

Abstract

This article argues that the structure of a country's venture capital (VC) sector is a critical factor in the effectiveness of the sector. In particular, it is argued that the balance between small funds and large funds is important: that a preponderance of small VC funds leads to excessive syndication which compromises firm and fund performance, reduces the ability to raise additional capital and leads to a reliance on foreign investors. This implies that public policies that seek to stimulate early-stage VC can lead to a VC sector that is bottlenecked in the sense that the successful portfolio firms may be unable to obtain late-stage investment capital and may be forced to rely on foreign investors. This work tests this premise empirically using data for the Canadian setting and finds results consistent with these expectations.

Suggested Citation

  • Miwako Nitani & Allan Riding*, 2013. "Fund size and the syndication of venture capital investments," Venture Capital, Taylor & Francis Journals, vol. 15(1), pages 53-75, January.
    • Handle: RePEc:taf:veecee:v:15:y:2013:i:1:p:53-75
    DOI: 10.1080/13691066.2012.730654
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    Cited by:

    1. Munari, Federico & Toschi, Laura, 2015. "Assessing the impact of public venture capital programmes in the United Kingdom: Do regional characteristics matter?," Journal of Business Venturing, Elsevier, vol. 30(2), pages 205-226.
    2. Tong Liu & Shiyou Qu & Christopher M. Scherpereel, 2020. "The Influence of the Role Positioning of Investment Institutions on the Value of Start-Up Enterprises from the Perspective of Network," Sustainability, MDPI, vol. 12(2), pages 1-19, January.
    3. Shuangshuang Kong & Miwako Nitani & Allan Riding, 2016. "Cross-border VC investment in Canadian firms: implications for exit patterns," Venture Capital, Taylor & Francis Journals, vol. 18(1), pages 63-93, January.

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