EM LyonEmmanuelle DUBOCAGE attended the Entrepreneurial Finance Conference 2016, hosted by the University Lyon 3 (EM Lyon), on July 8th and 9th 2016. She presented her paper “Are staging and syndication good predictors of performance for venture-backed companies? Empirical evidence from the U.S. context” written in collaboration with Aurélie Sannajust.
We model the impact of staging and syndication on the performance of venture-backed companies. Using robust probit estimates, we test our hypotheses on 884 American venture-backed companies created from 2005 to 2010. The econometric estimates fully support our contentions that syndication has a positive impact on success: The size of the syndication at the first round and during the lifespan in the portfolio are positive predictors of success exit by IPOs or trade sale. Moreover, we find a positive impact of the renewal of VCs in syndication in the case of trade sale, which attests to the key role of new competencies in syndicates. Our empirical results are enlightened by a new perspective: VCs in syndicates improve the dynamic capabilities of venture-backed companies and then enhance performance. In addition, we provide evidence that staged investment slows down the entrepreneur with respect to the rate of innovation and reinforces the “liability of lateness,” which is detrimental to performance.