Heterogeneous venture capitalists and syndicate switching

In early round investments by VC syndicates, the VCs which compose the syndicate often have very different levels of experience. In later round VC syndicates, often no VC from the earlier round syndicate is present. We show that a theory of informational hold-up by the incumbent syndicate can relate and explain these two observations. Consistent with the theory, we find empirically that the heterogeneity in experience of VC syndicate partners is (i) negatively related to the extent to which outside VCs trust in the entrepreneur and (ii) positively related to the likelihood of syndicate switching in a later round