The Analysis of Cross-border Venture Capital Networks and Investment Performances Using a Logit Model

Abstract

This paper explores if venture companies are more successful if they receive venture capital support from institutional venture capital (VC) investors that have a greater number and quality of network ties to other VC investors. In particular, this paper looks at 285 U.S.-based companies that received syndicated investments from both U.S. and Asian VC funds between 1995 and 2016. There are precedent studies represented that VC funds with a wider range of partners will outperform to help companies achieve successful market exits, with better information diffusion. This paper suggests that those same reasons should be amplified if there are cross-national partnerships among U.S. and Asian VC funds in the U.S. market, too. This paper structured the unweighted and undirected adjacency matrix using graph theory to compute the quality and quantity of inter-fund network ties and enhanced effectiveness of analysis by using the logit model. Ultimately this paper finds a positive impact of larger VC syndicate networks on successful portfolio company exits in sampled cross-border VC syndication set. Previous research identified comparative benefits of VC investors with wide-ranging connections are also applicable to the narrower set of companies that are funded through both U.S. and Asian VC funds.