Venture capitalists strategically syndicate investments to ensure consistent ownership stakes.
The study looked at why venture capitalists team up to invest in biotechnology firms. They found that experienced venture capitalists tend to work together, especially in the early stages of investing. In later stages, they team up with both experienced and less experienced investors. When experienced venture capitalists join in later rounds, it usually means the firm is doing well. Working together also helps venture capitalists keep their ownership stake steady as the firm grows.