Tuesday, November 3, 2009

Venture Capitalists Use High School Rules

Like other, more commoditized industries, venture capital (VC) has no obvious natural or regulatory barriers to entry; a new VC firm is free to open up shop in any place it wants. Because of the low cost of entry, incumbent VC firms are forced to defend their territory using a combination of economic and social tactics—such as creating exclusive cliques for deal referrals and even ostracizing those incumbent VC firms that decide to associate with outsiders.
From "In with the 'In' Crowd: In venture capital, high school rules prevail" based on the Research of Yael Hochberg, Alexander Ljungqvist And Yang Lu, Kellogg School Of Management.

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