Learning-by-Syndicating: How Past Investor Co-Investment Ties Affect Entrepreneurial Firm Exit

Abstract

We analyze a sample of over 18,000 venture-backed entrepreneurial firms in the U.S. to explore how the intensity of prior co-investment relationships among a focal entrepreneurial firm’s (EF) venture capital (VC) investors – which we call syndicate cohesion – influences the firm’s propensity to achieve an IPO or an acquisition exit. We find that whereas there is an inverted-U relationship between the amount of past co-investment experience among an EF’s VC investors and its likelihood of becoming acquired, an EF is more likely to go public if there is less past co-investment experience among its VCs. We also show that an EF with VC investors that have co-invested in previously acquired firms is more likely to be acquired itself whereas an EF with VCs that have co-invested in firms that have gone public is more likely to go public itself. We discuss the implications of our results for work on entrepreneurial firm strategy, inter-organizational networks, and organizational learning.