Family Firms in Entrepreneurial Finance: The Case of Corporate Venture Capital

Abstract

We show that families are an engine of venturing activities: almost 30 percent of all corporate venture capital (CVC) deals in the US from 2000 to 2017 originated from family firms. Family firms, especially those led by family CEOs, orchestrate CVC activities differently than non-family firms: they syndicate more often and with more reputable investors, join larger syndicates, and make more proximate deals (geography- and industry-wise). Family firms’ approach to corporate venturing maps into performance results: family CVC-backed ventures exhibit a higher likelihood of successful exits. We explore several mechanisms pertaining to asymmetric information and risk management. Collectively, our results shed light on the important, and largely unexplored, role of family firms in CVC.

Keywords: Corporate venture capital; family ownership; investment; performance

JEL Classification: G24; G32; O32