Differences in Performance of Independent and Finance-Affiliated Venture Capital Firms

Abstract

We examine the differences in the investment behaviors of independent and finance-affiliated venture capital firms (VCFs). We find differences in internal management mechanisms and staff backgrounds lead to external performance differences. Using VC-backed companies listed in Singapore as our sample, we find significant differences between these two types of VCFs in industry preference, investment duration, VCF syndication, number of board seats, initial underpricing, and long-term market returns. Independent VCFs add more value to their portfolios. Thus, we conclude that the participation of independent VCFs is an important corporate-level factor for the success of the venture capital market.

JEL Classification: G12, G15, G23, G32