Does Syndication With Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance?

Tykvová, Tereza; Schertler, Andrea

doi:10.1016/j.intman.2014.09.001

Cited by 50 publications

(28 citation statements)

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“…Second, region-specific patterns of VC activity have been documented by Bertoni, Colombo, and Quas (2015) and Bozkaya and Kerr (2014) for Europe. International analyses of VC investment patterns linked to differences in institutional settings have been examined, among others, by Bertoni and Groh (2014), Bonini, Alkan, and Salvi (2012), Dai and Nahata (2016), Guler and Guillén (2010), Johan, Schweizer, and Zhan (2014), Li and Zahra (2012), Schertler and Tykvová (2012), Schwienbacher (2008), Tykvova and Schertler (2014), and Wang and Wang (2012). Prior work has not examined VC investment cycles of fintech.…”

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confidence: 99%

Fintech venture capital

Cumming

Schwienbacher

2018

Corporate Governance

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Manuscript Type Empirical Research Question/Issue Where are fintech venture capital investments taking place around the world? What is the role of institutional factors on the international allocation of fintech venture capital? Research Findings/Insights We document a notable change in the pattern of fintech venture capital (VC) investments around the world relative to other types of investments after the global financial crisis. We show that fintech venture capital investments are relatively more common in countries with weaker regulatory enforcement and without a major financial center after the financial crisis. Also, we show the fintech boom is more pronounced for smaller private limited partnership venture capitalists that likely have less experience with prior venture capital booms and busts. These fintech VC deals are substantially more likely to be liquidated, especially when located in countries without a major financial center. Theoretical/Academic Implications We build on the institutions and corporate governance literatures by showing the importance of enforcement in driving relative differences in investment patterns and investor participation. For entrepreneurial startups, regulatory arbitrage drives investment into countries with a dearth of enforcement and regulatory costs. We argue that the spike in fintech venture capital in certain countries is attributable to differential enforcement of financial institution rules amongst startups versus large established financial institutions after the financial crisis. Practitioner/Policy Implications Regulatory arbitrage in the context of fintech venture capital can spur booms and busts. Less experienced venture capitalists seem more prone to undertake investments that exacerbate boom and bust cycles. National governance is strengthened by the enforcement of regulatory standards, and corporate governance through investor experience and oversight can mitigate these swings, and facilitate better investment outcomes.

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confidence: 99%

Fintech venture capital

Cumming

Schwienbacher

2018

Corporate Governance

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“…This points to a high relevance of basic institutional proximity (shared norms, regulations and values). The importance of institutional proximity has already been highlighted in previous research (Tykvova & Schertler, 2014). The importance of institutional proximity exceeding the basic levels of nationally shared norms and regulation can be assumed for 'spinoff developers', as these VC firms mostly interact with startups started by former scientists.…”

Section: Investment Targetsagenda Of Relational Coordinationmentioning

confidence: 95%

Geographies of relational coordination in venture capital firms

Kuebart

2019

European Planning Studies

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Venture capital (VC) firms are crucial actors in entrepreneurial ecosystems. Through the development towards a digital economy, they have gained further relevance, which caused the VC industry to diversify in terms of business models. This article offers a new heuristic to study the VC industry by developing a classification of VC firms. By drawing on a framework of different dimensions of relational distance in investment relations, different types of relational coordination are identified by comparing VC firms in Germany. The types of VC business models are found to produce relational geographies of investing as they relate with their portfolio startups in different ways. A relational perspective on VC thus provides the opportunity to step beyond pure territorial approaches on VC.

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“…In financial markets, the latter is presented as the phenomenon below: more participants are from developed countries or regions; for example, about 60% of venture investments are joint investment in the United States and Canada, and about 30% in Europe [2]. From the geographical perspective, foreign VCs syndicate with a local VC in 57% of all cross-border deals [3]. More and more venture capitalists (later denoted as VCs) and venture entrepreneurs (later denoted as ENs) prefer joint investment; the reasons are as follows.…”

Section: Introductionmentioning

confidence: 99%

“…(4) Joint investment may reduce costs and modify risk allocation, which would be a burden for foreign VCs if they invest alone [3]. (5) Through syndication, foreign VCs may obtain easier access to investment opportunities and may face lower information costs and risks [3]. (6) Venture capital syndication model for enterprises and investors would bring better performance.…”

Section: Introductionmentioning

confidence: 99%

The Optimal Multistage Effort and Contract of VC’s Joint Investment

2015

Discrete Dynamics in Nature and Society

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If the venture project has a great demand of investment, venture entrepreneurs will seek multiple venture capitalists to ensure necessary funding. This paper discusses the decision-making process in the case that multiple venture capitalists invest in a single project. From the beginning of the project till the withdrawal of the investment, the efforts of both parties are long term and dynamic. We consider the Stackelberg game model for venture capital investment in multiple periods. Given the optimal efforts by the entrepreneurs, our results clearly show that as time goes, in every single period entrepreneurs will expect their share of revenue paid to shrink. In other words, they expect a higher ex ante payment and a lower ex post payment. But, in contrast, venture capitalists are expecting exactly the opposite. With a further analysis, we also design an optimal contract in multiple periods. Last but not the least, several issues to be further investigated are proposed as well.

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Does Syndication With Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance?

Cited by 50 publications

References 56 publications

Fintech venture capital

Fintech venture capital

Geographies of relational coordination in venture capital firms

The Optimal Multistage Effort and Contract of VC’s Joint Investment

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