Competition, Reputation, and Venture Capital Investment
Publication Date
1-13-2021
Abstract
This paper examines the impact of competition on the investment behavior and outcomes of venture capital (VC) firms with differing reputations. Following the introduction of investor tax credit programs that increase competition, reputable VCs decrease the number and size of their investments. The results are more pronounced in states with lower investment requirements and lower VC supply. Reputable VCs also reduce their syndicate size and shrink the time between financing rounds. They become less likely to partner with serial founders and their performance deteriorates. Our results suggest that increasing competition depresses returns for reputable VCs, hurting their incentive to invest.
Document Type
Article
Keywords
Venture capital, reputation, competition, investor tax credit
Disciplines
Finance
DOI
10.2139/ssrn.3761472
Source
SMU Cox: Finance (Topic)
Language
English
