Corporate Venture Capital as a Strategic Exit for Existing Venture Capital Investors

Existing corporate venture capital literature has focused on how the needs of the startup and incumbent firms influence relationship formation. We complement these works by considering whether the need of traditional venture capitalists to liquidate their positions and exit their investments also influences corporation-startup dyad formation. Given that corporate investors can either acquire their portfolio companies, or signal quality that may induce others to acquire, we hypothesize that corporate investors may be included in investment syndicates as the attractiveness of an acquisition exit increases. We find that corporate investors are more likely to be included in an investment syndicate as the startup’s growth trajectory wains and as the existing investors near their funds’ end. In addition, we find mixed evidence of whether corporate investors are less likely to be included during hot IPO markets. By introducing considerations outside of market and technology overlap, we contribute to a more holistic understanding of the role of corporate investors within the venture capital community.