Whom You Know Matters: Venture Capital Networks and Investment Performance

  • Author(s): YAEL V. HOCHBERG, ALEXANDER LJUNGQVIST, YANG LU
  • Published: Jan 11, 2007
  • Pages: 251-301
  • DOI: 10.1111/j.1540-6261.2007.01207.x

ABSTRACT

Many financial markets are characterized by strong relationships and networks, rather than arm's‐length, spot market transactions. We examine the performance consequences of this organizational structure in the context of relationships established when VCs syndicate portfolio company investments. We find that better‐networked VC firms experience significantly better fund performance, as measured by the proportion of investments that are successfully exited through an IPO or a sale to another company. Similarly, the portfolio companies of better‐networked VCs are significantly more likely to survive to subsequent financing and eventual exit. We also provide initial evidence on the evolution of VC networks.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version