Appendix Transaction Example

The following example clarifies the approach taken in this paper to infer the lead investor and syndication patterns: On March 1, 1998, Munich-based Apax Partners invested capital into the early stage biotech firm Wilex Biotechnology, a firm that develops novel cancer therapies. On April

1, 1999, Apax and Earlybird Venture Capital provided additional expansion financing. On October 20, 2000 and on May 10, 2005, two additional rounds of financing were provided by Apax, Earlybird, Julius Bär, and Merlin Bioscience, and by Apax, Earlybird, Karolin- ska Invest, and Quest Management, respectively.

Based on the previous elucidations, we infer that Apax Partners acted as the lead investor: it was involved in the first round of financing and financed the maximum number of rounds (this would still be the case even if Apax had not been involved in the last round of financing). Consequently, the underlying model of partner selection captures the decision of which coinvestors were chosen by the lead investor. The first entry in the data set therefore includes the decision made in 1999 to collaborate with Earlybird Venture Capital. Because Earlybird is included in the list of the top 35 investors (with at least 10 deals, equal to an average of one deal per year), Earlybird receives an entry of one, and all other VCs (including 3i, TBG, and Deutsche Bank Investor) receive an entry of zero. We restrict the explanatory variables to all information on the VCs until the end of the year 1998 to avoid causal dependencies between the transactions made in 1999 and the decisions made in the same year. Further, we calculate differences in investment experience among the lead investor, the chosen partner, and the nonchosen candidates based on all transactions cumulated until the end of the year 1998. For the next decision, to invite Julius Bär and Merlin Bioscience, the list of the top 35 (minus Earlybird, which was chosen previously) is dilated by the two chosen firms. They each receive an entry of one, and all nonchosen candidate firms receive zeros. To cope with the changed investment context, we now include all information on the VCs cumulated until the end of the year 1999. This exercise repeats for the last invitations made in 2005, including all information on the VCs cumulated until the end of 2004.

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Christian Hopp is an Assistant Professor in International Personnel Management in the Department of Business Administration at the University of Vienna, A-1210 Vienna, Austria.

Christian Lukas is a chair for Controlling at the University of Jena, 3. OG/Raum 3.104, Carl-Zei b-Straße 3, 07743 Jena, Germany.

The authors would like to thank Benson Honig (the editor), Günter Franke, Thomas Weber, Julia Hein, Oliver Fabel, and three anonymous reviewers for invaluable feedback on an earlier draft of this paper.

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Appendix Transaction Example