Venture Capital Syndication Ties as Pathways to Strategic Alliance Formation

Sarath Balachandran, Management, The Wharton School

Abstract: Strategic alliances with established enterprises are known to be a valuable resource for entrepreneurial firms to obtain access to knowledge and resources which support their growth. In this paper we examine how the networks of the venture capitalists (VCs) that back them influence startups’ access to these alliances. Though prior research has examined the effect of the status or prominence of VCs on various startup outcomes, there have been few studies that examine the composition of VCs co-investment networks in this context. We look specifically at the ties VCs possess with the investing arms of established firms as potential pathways of access to the established firm that could enhance the possibility of a strategic alliance between the startups in the VCs portfolio and the established firm. We also examine how the organizational structure of the established firm and the network structure within which the relevant ties are embedded influence this effect. The study has important implications for the way startups choose their sources of financing and therefore more broadly on the act of organizing for innovation.

Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.