“In the entrepreneurship world, we hear a lot about ‘exits’ for firms because that’s when the founders and investors make money,” says study coauthor Emily Cox Pahnke, an associate professor of management and organization at the University of Washington Foster School of Business.

“In most industries, both acquisitions and initial public offerings, or IPOs, are great exits. But what it takes to get to them is different. Our research shows that different patterns of collaboration between venture capitalists lead to different types of exits for the firms they invest in.”

When a venture capital firm, or VC, invests in a startup, it often does so with other VCs as part of a syndicate. VC syndicates share knowledge and resources as they work to guide their startup toward a successful exit strategy—either an acquisition or an IPO.

The study, recently published in the Academy of Management Journal, found that firms whose VCs invested with other VCs they had worked with in the past were more likely to exit through acquisition.

Acquisitions can be a form of fast exit where a venture is sold to a larger one. By contrast, less prior collaboration among VCs in a syndicate leads to the increased likelihood of a venture going public. Surprisingly, researchers found the same patterns of collaboration that increase the odds of an IPO also increase the likelihood that a firm will go bankrupt.