IPOs and syndication, a networking effort? How different network structures change the importance of previous investment experience of Venture Capital firms

Abstract

In less than nine years, the amount of Venture Capital nearly tripled from €10 billion to €28 billion. The purpose of this research is to shed light on contradicting points of view and to contribute to a further understanding of the internationalization of the Venture Capital industry and literature. In this research, the following research question is answered: ‘Do the network structure and experience of Venture Capital firms (VCs) affect the probability of an IPO?’. Two samples of firms that were backed by Venture Capital firms were taken from a larger dataset that was retrieved from Crunchbase. Information about the top five VCs is gathered and their network structure was determined. One sample contained syndicates that consisted of only domestic VCs and one sample contained syndicates that consisted of both domestic and cross-border VCs. A logistic regression was done for both samples and the results were compared. All findings were found to be non-significant. The results indicated that VCs’ experience does not affect the probability of an IPO. In addition, network structure does not moderate the effect of experience on the probability of an IPO. Due to multicollinearity and issues with validity, these findings had to be interpreted with caution. It is for future research to unravel further understanding of the relationship between network structure, previous investment experience of VCs and IPOs. Interestingly, evidence for a positive relationship between innovativeness and IPO exits is found to be significant.