Upfront payments to venture-backed startups in technology alliances: Bargaining effects of VC affiliations

Upfront payments are important financial resources startups seek to negotiate in technology alliances. This study unpacks how venture-backed startups can benefit from their VC affiliations and obtain better payments. We develop a bargaining framework and argue that VCs can strengthen venture-backed startups' hand in alliance negotiations through two distinct pathways: (i) by providing a quality signal, and (ii) by serving as conduits of alternative partnering options. We further suggest that these distinct benefits in bargaining hinge on startups' technological quality, which substitutes for the quality signal arising from VC affiliations but complements the VC's intermediation role in markets for partners. The evidence therefore identifies the distinct and complex channels by which VCs can help startups obtain financial resources at nascent stages through their technology alliances.