Longer investment duration enables the VC to minimize the pronounced agency costs between high-technology entrepreneurial firms and their new owners, and therefore maximize the value of the firm upon exit. Duration will therefore be independent of technology insofar as agency costs among high-technology firms are trivial. Rather, the duration of technology investments is typically influenced by a plethora of other factors. This alternative to the null hypothesis on the relation between technology and investment duration will be tested in the empirical analysis in section 4. Staging mitigates the need to maintain an investment over a longer total duration for the following reasons.
Syndication involves more than one venture capital firm investing in an entrepreneurial venture.
A syndicated investment will not require as lengthy an investment as non-syndicated investments, ceteris paribus, because informational asymmetry between the new owners and the firm is mitigated. The greater the number of investors, the better the signal to the new owners that there exists less informational asymmetry associated with investing in the venture. As VCs actively monitor their investments, they do not have time to monitor a large number of investments 5 . Increases in the funds for additional investment constrain the amount of time venture capitalists can devote to their existing investments, which in turn may inspire early exit of existing investments. This proxy gives rise to the potential for endogeneity.