The Role of Venture Capital Syndication for Building a Competitive Advantage in Impact Venture Capital

Abstract

This thesis examines the influence of syndicates on the ability of venture capital (VC) funds to build a competitive advantage in impact investing. Further, it investigates how syndication enhances social innovation performance and the effect of social innovation on the ability to build a competitive advantage. The empirical analysis is based on 10 semi-structured interviews with impact and non-impact venture capitalists. Impact investing to be successful needs to navigate the complex areas of impact measurement and reporting and social innovation. Syndication is essential in this context due to its ability to pool resources and knowledge and diversify investment portfolios. Further, engaging in impact measurement and reporting can help companies to anticipate future regulatory risk and improve stakeholder management, which can become a competitive advantage for VCs. The findings suggest that VCs can get access to unique and complementary resources, knowledge and network through syndication that are necessary for the identification, assessment and selection impact investments. These resources are necessary for impact measurement and reporting and to identify and practice social innovation. This research fills a gap by examining how syndication supports VCs in building sustainable social and environmental innovations through collaborative strategies, improving access to deal flow, deal selection and value-added for impact ventures while managing agency challenges.