Prior ties, investor role, and venture capital syndication

Abstract

Prior literature recognized the importance of members’ prior ties on venture capital (VC) syndicated investments and uncovered investors’ different roles, in separate streams of research. This study bridges these two relevant but disjoint streams by examining how different roles’ prior ties affect VC syndicated investments. We consider the difference between leaders and followers, as well as their prior ties to the VC network and to the target investee. Our empirical analysis of the Chinese VC market demonstrates that VC investors’ prior ties have stronger influences for followers in VC syndicate formation than those for leaders. This research sheds lights on the understanding of different mechanisms of VC syndicate formation for different roles.