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Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships

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  • Qianqian Du
  • Thomas F. Hellmann

Abstract

Does doing more deals together always strengthen investor relationships? Based on the relationships of the top 50 US venture capital firms, this paper focuses on the strengths of relationships and their dynamic evolution. Empirical estimates indicate that having a deeper relationship leads to fewer, not more future coinvestments. Moreover, deeper relationships lead to lower exit performance, even after controlling for endogeneity. Interestingly, deeper relationships first lead to lower performance, and subsequently lead to a slowdown in the relationship intensity. Relationship effects are more negative for VC firms with less central network positions, and for deals made in “hot” investment markets.

Suggested Citation

  • Qianqian Du & Thomas F. Hellmann, 2019. "Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships," NBER Working Papers 26274, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26274
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    Cited by:

    1. Shumiao Ouyang & Jiaheng Yu & Ravi Jagannathan, 2020. "Return to Venture Capital in the Aggregate," NBER Working Papers 27690, National Bureau of Economic Research, Inc.

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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