Venture capital syndication in times of economic crisis

This study analyses the effects of the 2000–2001 dot-com crisis and the 2008–2009 financial crisis on venture capital syndication. Using propensity score matching analysis, we show that during the two crises, venture capital firms (VCFs) had a lower tendency to syndicate their investments, and the size of the syndicates was smaller. This effect is found to be stronger for later-stage financing than for early stage financing. We explain the lower propensity to syndicate and the reduction in syndicate size by the existence of fewer exit opportunities for VCFs and a lower supply of funds for the venture capital industry. Implications for VCFs and start-up firms are discussed.