Forsake not an old friend: prior co-investments and the performance of European venture capital syndicates.

Co-investing in a venture capital syndicate with known partners is a common practice that has recently attracted much attention by academic literature. Existing studies explore the relation-ship between prior co-investments and syndicate performance but are exclusively focused on US data. However, the profound differences between US and European venture capital ecosys-tems hint that the results obtained for the former are not necessarily true for the latter. We adopt an agency perspective, proposing that prior ties in European venture capital syndicates are nega-tively correlated to the likelihood of a successful exit. To test our hypothesis, we collect a unique dataset of 922 first-ever syndicated rounds happening in Europe between 2000 and 2009, tracing back co-investments since 1995. Contrarily to what emerges for US firms, we find that prior co-investments are not a significant determinant of successful exits. In addition, we dis-cuss the role of prior ties in determining the time to successful exit, focusing on the multiple agency relationships inside a syndicate and proposing that this relationship is U-shaped. We find significant evidence supporting our hypothesis, with additional prior co-investments reduc-ing the time to exit up to 4.5 average previous co-investments per syndicate member, after which we observe an increase in the time necessary to exit the investment successfully. Our re-sults provide a first investigation on the role of prior ties in European venture capital syndicates and first evidence of the effect of prior ties on the time to exit successful investments. These re-sults can be useful to managers involved in interorganizational collaboration and to policymak-ers that must develop strategies to spur regional venture capital ecosystems.