Investors as Capabilities: Intra-Investor Complementarities and Startup Performance

The contribution of investors to the performance of their portfolio companies within the VC industry has been researched thoroughly. A novel aspect of this paper is that it examines the impact of a syndicated investment using two different measures: (a) the total number of investors; and (b) the total number of different investor types. Using a novel dataset and while controlling for the endogeneity, this paper finds that having more investors of the same type has a positive curvy-linear impact on the portfolio company's performance. However, a larger number of investor types has only a positive linear impact on the company's performance. It is suggested that a tradeoff between having more investor complementarities and increased coordination costs is the driving mechanism of these results.