Key Takeaways
- • A study by Tuft and Yimfor, published in the Review of Finance in 2026 and summarized by Alpha Architect, finds that disruptions to established ties between venture capital firms and investment bank underwriters reduce VC IPO exits by approximately 9.5%.
- • The same disruptions reduce venture capital fund multiples by approximately 7.8%, linking intermediary relationships directly to investment outcomes.
- • The authors identify exogenous shocks from underwriter mergers and closures, using a difference-in-differences design that compares affected VC firms with those that kept their underwriting relationships.
- • Effects are most pronounced for smaller VC firms and funds nearing exit, and are amplified when underwriter employee turnover is high, pointing to relationship-specific human capital.
- • Advisors are urged to assess a manager's intermediary network, underwriter concentration, and team continuity as part of private market due diligence.
Summary
A study by Tuft and Yimfor, published in the Review of Finance in 2026 and summarized by Alpha Architect, examines whether a venture capital firm's relationships with investment bank underwriters affect its ability to take portfolio companies public and, in turn, fund performance. The authors find that disruptions to these established relationships reduce VC IPO exits by approximately 9.5% and lower VC fund multiples by approximately 7.8%. To isolate the effect, the researchers exploit underwriter mergers and closures, which they treat as plausibly external disruptions to existing business ties, and apply a difference-in-differences analysis comparing affected firms with those that retained their underwriting connections.
The effects are concentrated among smaller VC firms and funds approaching the point at which they need to exit investments. According to the summary, larger firms tend to have broader networks and more alternatives when a relationship ends, while smaller firms may struggle to replace a trusted partner or establish credibility with a new bank. Funds nearing the end of their investment life have less flexibility to delay exits while rebuilding relationships.
The study also points to people as a key mechanism. Disruptions are particularly damaging when employee turnover at the underwriter is high, suggesting that relationship value is embedded in specific bankers rather than solely in institutions. The authors report that underwriter specialization and industry expertise do not fully explain the results. The paper further notes that underwriters may become involved with portfolio companies well before an IPO, acting as deal facilitators or late-stage investors in approximately 15% of cases.
For allocators, the paper's practical implications include evaluating a VC manager's network, IPO execution experience, and underwriter concentration, and treating intermediary relationships as a potential source of manager risk alongside investment selection. The authors describe their evidence as relationship-specific capital, particularly human capital, that facilitates access to capital markets.
The effects are concentrated among smaller VC firms and funds approaching the point at which they need to exit investments. According to the summary, larger firms tend to have broader networks and more alternatives when a relationship ends, while smaller firms may struggle to replace a trusted partner or establish credibility with a new bank. Funds nearing the end of their investment life have less flexibility to delay exits while rebuilding relationships.
The study also points to people as a key mechanism. Disruptions are particularly damaging when employee turnover at the underwriter is high, suggesting that relationship value is embedded in specific bankers rather than solely in institutions. The authors report that underwriter specialization and industry expertise do not fully explain the results. The paper further notes that underwriters may become involved with portfolio companies well before an IPO, acting as deal facilitators or late-stage investors in approximately 15% of cases.
For allocators, the paper's practical implications include evaluating a VC manager's network, IPO execution experience, and underwriter concentration, and treating intermediary relationships as a potential source of manager risk alongside investment selection. The authors describe their evidence as relationship-specific capital, particularly human capital, that facilitates access to capital markets.
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