Whom You Know Matters: Venture Capital Networks and Investment Performance

2007/01/11 by Yael V. Hochberg, YAEL V. HOCHBERG, Alexander Ljungqvist +3 · 1,921 citations
Business, Management and Accounting · #Business #Context (archaeology) #Corporate Finance and Governance #Economics #Finance #Financial system #Initial public offering #Investment (military) #Monetary economics #Portfolio #Private Equity and Venture Capital #State Capitalism and Financial Governance #Syndicate #Venture capital #Web syndication

paper · pdf · doi:10.1111/j.1540-6261.2007.01207.x

published in The Journal of Finance 62(1), 251-301 (Wiley)

openalex publication_date 2007/01/11 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04

Abstract

ABSTRACT Many financial markets are characterized by strong relationships and networks, rather than arm's‐length, spot market transactions. We examine the performance consequences of this organizational structure in the context of relationships established when VCs syndicate portfolio company investments. We find that better‐networked VC firms experience significantly better fund performance, as measured by the proportion of investments that are successfully exited through an IPO or a sale to another company. Similarly, the portfolio companies of better‐networked VCs are significantly more likely to survive to subsequent financing and eventual exit. We also provide initial evidence on the evolution of VC networks.

Citations

• Interorganizational Endorsements and the Performance of Entrepreneurial Ventures
• Power and Centrality: A Family of Measures
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