• Title/Summary/Keyword: Venture Capital Syndication

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IPO/M&A Exits by Venture Capital in India: Do Agency Risks Matter?

  • Joshi, Kshitija;Chandrashekar, Deepak
    • Asian Journal of Innovation and Policy
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    • v.7 no.3
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    • pp.534-563
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    • 2018
  • Venture Capital Firms (VCs) encounter severe information asymmetry risks at almost every stage in their investment lifecycle. This paper explores the agency risks arising from information asymmetry during the stage of exits by VCs from the funded companies in their portfolio and how that impacts the incidence of specific types of type of exits (IPOs/M&As). In this empirical study, by using the data on IPO and M&A exits from venture capital-funded companies, we show how the ability of prospective buyers to better resolve agency risks is directly correlated with the incidence of the above exit types. Using the technique of logistic regression, we demonstrate that factors such as syndication, specialization focus of the VC firm (in terms of stage and sector) and the level of its social capital (proxied by its age and experience) drive the success rate of exits. This is one of first studies in context of exits from VC funded companies in the Indian context.

Managing Information Asymmetry Risks Using Deal Syndication and Domain Specialization: An Indian Context

  • Joshi, Kshitija
    • Asian Journal of Innovation and Policy
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    • v.7 no.1
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    • pp.150-177
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    • 2018
  • We review two specific risk management strategies of venture capitalists (VCs): deal syndication and domain specialization with respect to their explicit role in adjudging and managing the overall magnitude of information asymmetry risks. These are analyzed for three distinct categories of VC firms as classified by their funding stage focus (early vs. late), ownership type (foreign vs. domestic) and the human capital composition of the core VC team (entrepreneurial vs. investor). The analysis is based on both secondary data and primary data for active 72 VC firms in India. Syndication is moderately important for entrepreneurial VC firms, but not at all important for early-stage focused and foreign VC firms. This finding is distinctly different from what has been conventionally observed in the literature. Among the various arenas of domain specialization, high-technology focus is important for all segments of VC firms. In the context of investment-stage focus, foreign VC firms exhibit growth-stage specialization, while entrepreneurial VC firms concentrate on earlier investment stages.

Venture Capital Syndicate Diversity: Three Types and their Effects on Performance (벤처 캐피탈 신디케이트의 다양성: 세 가지 범주와 성과에 미치는 영향)

  • Shin, Sang Yoon
    • The Journal of Small Business Innovation
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    • v.21 no.1
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    • pp.43-59
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    • 2018
  • This study investigates the relationship between venture capital (hereafter, VC) syndicate diversity and the IPO performance of an entrepreneurial company backed by the syndicate. Specifically, focusing on three types of diversity within a VC syndicate, which are aligned with Harrison and Klein's seminal categorization in 2007 (i.e., separation, variety, and disparity), this study suggests their distinct effects on performance. Two stage least square analyses with 1,127 VC syndicate investments made by 6,268 VC firms strongly supported the hypotheses. The results showed that that capacity diversity decreases the performance and that expertise diversity and network diversity increase it.

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