Syndication in the venture capital industry during different stages of the business cycle

• In this paper we describe and analyse the development of the Swedish venture capital industryand its syndication pattern during the years 1996–2004. These nine years can be divided intothree different stages in the business cycle. The period from 1996-1998 is considered to be aperiod of moderate growth, where the Swedish economy and capital market was stillrecovering from the crisis in the early 1990s. The level of investment and syndication wasrelatively low in comparison with the following years and the primary reason for syndicationwas that of sharing risks. In the overheated Swedish economy between 1999 and 2001 supplyof capital to early stage investments were plentiful and new venture capital firms entered themarket every month. Since capital was plentiful the investors was in constant search for newventures to invest in which made it easy for venture capitalists to find syndication partners fortheir second round financing at a good valuation. After the drastic downturn in the venturecapital industry in 2001 the level of investments was relatively low during 2002–2004. In all,the total number of investment during the period 2002–2004 was lower than during 2001.Furthermore, the investments during this period were to a large extent in the form ofsyndication. During the shake out period, the survivors of the industry were more prone to do first round syndications again. The sharing of monitoring costs and risk sharing were the mostcommon reasons for syndication in this period.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

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