Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships

Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships

Qianqian Du, Thomas Hellmann

Series number :

Serial Number: 
630/2019

Date posted :

September 19 2019

Last revised :

September 19 2019
SSRN Share

Keywords

  • venture capital • 
  • Investment Networks • 
  • Investor relationships • 
  • Network Dynamics

Does doing more deals together always strengthen investor relationships? Based on the relationships of the top 50 US venture capital firms, this paper focuses on the strengths of relationships and their dynamic evolution. Empirical estimates indicate that having a deeper relationship leads to fewer, not more future coinvestments.

Moreover, deeper relationships lead to lower exit performance, even after controlling for endogeneity. Interestingly, deeper relationships first lead to lower performance, and subsequently lead to a slowdown in the relationship intensity. Relationship effects are more negative for VC firms with less central network positions, and for deals made in “hot” investment markets.

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Authors

Real name:
Qianqian Du