Who are you hanging out with? The conditional importance of investment managers’ personal reputation in the formation of venture capital syndication ties

We examine how the two dimensions of VC managers' personal reputation, that is, ?being known? and ?being known for quality?, jointly influence the formation of initial syndication ties. We propose that VC managers follow a two-stage cognitive process. In the first stage, the ?being known for quality? dimension ? a reflection of their abilities-must enter their ?consideration set?. The ?being known? dimension is crucial to draw attention to potential candidates. In the second stage, lead VC managers evaluate the signal conveyed by the ?being known for quality? dimension of prospective partners' reputation. The ?being known? dimension is also important at this stage, as it allows for a more accurate assessment of what is otherwise a noisy signal. We test our hypotheses on a pairwise dataset of 1686 realized and 14,395 counterfactual initial syndication ties between VC managers. We find that lead VC managers are more likely to form initial syndication ties with VC managers with similar reputations. This effect is stronger if they share a previous common employer, have a similar industrial or geographic investment focus, or work at VC firms that have previously syndicated one or more investments with each other or with the same VC firm.