Small fish, big fish: the impact of venture capital portfolio composition on affiliation benefits

This study argues and empirically demonstrates that the value of a venture’s affiliations depends in part on its relative standing in the portfolio of affiliations held by its partners. Relative standing is determined by how the venture ranks among other ventures in the partner’s portfolio with respect to observable signals of quality. We argue that the relative standing of a venture in its partner’s portfolio influences the focal venture’s access to the partner’s resources and, subsequently, the venture’s performance. We also argue that a venture’s relative standing becomes a more important predictor of performance when the partner has a larger portfolio or higher status. An empirical test of the equity investments by venture capital firms in 1011 private biotechnology ventures between 1980 and 2004 provides support for the hypothesized relationships

Small fish, big fish: the performance effects of the relative standing in partners' affiliate portfolios

This study examines whether the value a venture derives from an affiliation depends on its relative standing in the portfolio of all affiliations held by its partner. Relative standing refers to how thenventure ranks among other ventures in the partner’s portfolio with respect to expected returns. The relative standing of a venture in its partner’s portfolio influences the venture’s access to the partner’s resources and the venture’s performance. We also argue that a venture’s relative standing becomes more important to performance when the partner has a larger portfolio or higher status. In addition to a field study, we test the effect of a venture’s relative standing in a venture capital portfolio on its exit likelihood, controlling for endogeneity. We find support for our hypotheses

The impact of portfolio composition on affiliation benefits

This study argues and empirically demonstrates that the value of a venture's affiliations depends in part on its relative standing in the portfolio of affiliations held by its partners. Relative standing is determined by how the venture ranks among other ventures in the partner's portfolio with respect to observable signals of quality. We argue that the relative standing of a venture in its partner's portfolio influences the focal venture's access to the partner's resources and, subsequently, the venture's performance. We also argue that a venture's relative standing becomes a more important predictor of performance when the partner has a larger portfolio or higher status. An empirical test of the equity investments by venture capital firms in 1011 private biotechnology ventures between 1980 and 2004 provides support for the hypothesized relationships