Polishing Diamonds in the Rough : The Sources of Syndicated Venture Performance

Using an effort-sharing framework for VC syndicates, we assess how syndication impacts investment returns, chances of successful exit, and the time taken to exit. With data from 1980-2003, and applying apposite econometrics for endogeneity to these different performance measures, we are able to ascribe much of the better return to selection, with the value-addition by monitoring role significantly impacting the likelihood and time of exit. While the extant literature on Venture Capital (VC) syndication is divided about the relative importance of the “selection” and “value-add” hypotheses, we find that their roles are complementary