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Discussion Paper Details

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Title: Learning and Syndication in Venture Capital Investments

Author(s): Catherine Casamatta and Carole Haritchabalet

Publication Date: April 2003

Keyword(s): competition, learning, syndication and venture capital

Programme Area(s): Financial Economics

Abstract: The objective of this Paper is to understand: i) why venture capital investments are often syndicated; and ii) what are the effects of syndication on the post-investment involvement of venture capitalists. We analyse a model where a venture capitalist's efficiency to screen an uncertain project depends both on experience and on the signal they can obtain from another specialized investor. Disclosing the existence of the investment project to this second investor is harmful since the latter becomes de facto a potential competitor. We show that this potential competition can only be avoided through syndication, which affects the learning process. We further explore the cost of syndication in terms of investment decisions or post-investment involvement of venture capitalists.

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Bibliographic Reference

Casamatta, C and Haritchabalet, C. 2003. 'Learning and Syndication in Venture Capital Investments'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3867