Syndicated Deal with CVCs: What is the impact on a startup’s exit value?

Our goal in this post is to see what kind of impact can the syndication with CVCs have on a startup’s exit success. The main reason lies in the fact that CVCs investments are increasing year by year.

In 2018, approximately 260 new corporate venture capital (CVC) funds invested for the first time. This marked a 35% year-over-year increase with Google Ventures maintaining its top spot as the most active CVC investor. GV is followed by Salesforce Ventures and the mammoth Intel Capital occupied the third spot. In 2017, the total capital invested by CVCs was north of $30 billion, which included both old and new CVCs.

We will base this talk on a recent academic research study by Prof. Shinhyung Kang involving 1121 firms in the United States that received VC funding between 2001-2013. In addition, we will also refer to the prior research by Castellucci and Ertug (2010) which showed that in a syndicate, other investors tend to cater to the needs of the most reputable investors.

CVCs-IVCs syndication

The National Venture Capital Association, in 2016, stated that more than 13% of all VC deals in the US were done by CVCs. Generally, CVCs have a strategic objective of making an investment while Independent Venture Capital (IVC) funds have a financial focus. However, it often happens that CVCs and IVCs form a syndicate to share the risk of investment. Basically, syndication means that a number of investors come together with one of them acting as the lead investor. Here, the deal value as one transaction.

Here it is important to point out that syndication differs from co-investment. Namely, in the latter, two or more investors come together to invest in the same funding round of a venture. In this regard, it is worthwhile to shed some light on the impact of CVCs involvement in syndicates on a venture’s successful exit.

The impact of investors’ goals on startup’s exit success

If the CVC has a higher reputation than other investors, the CVC will prompt the venture to pursue more R&D activities that will lower the pace of commercialization. In contrast, as IVCs are focused on financial returns, the higher reputation of IVCs in a syndicate will push the venture to pursue more commercialization activities which will, in turn, lead to a successful exit. Kang’s study affirmed that in a syndicate when CVCs have a higher reputation than IVCs, the likelihood of a venture’s successful exit is negatively affected.

Geographic distance is another parameter can affect the startup’s exit success. Majority of IVCs and CVCs tend to prefer ventures that are located in close proximity. When a CVC is located in close proximity to a venture, the knowledge sharing between the venture and the CVC’s parent company increases and there is more spending on R&D investments. This, in turn, reduces the venture’s resources which would have been otherwise used to commercialize the venture’s product. Kang’s study concluded that when CVCs are more reputed in a syndicate and are in close geographical proximity to the venture, the likelihood of venture’s successful exit is further impacted negatively to a certain extent.

Preferences in syndication creation

For future syndication, CVCs tend to choose those IVCs with whom they have had prior syndication. This is important as the IVCs aid the CVCs in seeking, identifying and attract innovative companies in distant locations. Thus, trust reduces the cost of negotiation and increases communication between the firms participating in the syndicate. IVC investors in a syndicate are quite wary of CVCs tendencies to be more opportunistic. However, when there is strong trust between CVC and IVC, the tendency of CVCs to be opportunistic is lowered as jeopardizing the relationship with co-investors is not in the best interest of the CVC. The final conclusion of Kang’s study stated that prior syndication experience between CVC and IVC reduces the negative impact reputed CVCs have on the likelihood of a venture’s successful exit.  


  • Shinhyung Kang, (2019) “The impact of corporate venture capital involvement in syndicates”, Management Decision, Vol. 57 Issue: 1, pp.131-151.
  • The Most Active Corporate VC Firms Globally, CB Insights, Published Mar 28, 2019.
  • Castellucci, F. and Ertug, G. (2010), “What’s in it for them? Advantages of higher-status partners in exchange relationships”, Academy of Management Journal, Vol. 53 No. 1, pp. 149-166.