The role of venture quality and investor reputation in the switching phenomenon to different types of venture capitalists

We examine how the perceived quality of a venture and the reputation of the incumbent Venture Capitalist (VC) are affecting the propensity to switch from an independent VC (IVC) to another IVC, to a governmental (GVC), a bank-affiliated (BVC) and a corporate (CVC). We find that high perceived quality ventures are more likely to switch from a IVC to another IVC, for whatever level of reputation of the incumbent. The quality of the venture matters in the switching to a BVC too, when the reputation of the incumbent IVC is not particularly high. Conversely, the lower is the perceived quality of the venture and the lower is the reputation of the incumbent IVC, the higher is the likelihood to rematch with a GVC. Finally, results also suggest that the probability of successful exit increases when a switching occurs from an IVC to a new lead IVC or to a CVC.