On venture capital exit dynamics

Maia Gejadze (), Pierre Giot () and Armin Schwienbacher
Additional contact information
Maia Gejadze: IESEG School of Management
Pierre Giot: Université de Namur

Economics Bulletin, 2023, vol. 43, issue 1, 664 - 678

Abstract: This paper uses a competing risks model with time-varying covariates to study the duration of venture capital (VC) investments among U.S.-based VC-backed entrepreneurial start-ups. We specifically analyze the dynamics of venture capital funding, investment syndication, and financial market conditions throughout VC investment duration and then link these variables to the different exit outcomes. Parameter estimates from our models confirm that our approach provides refined evidence for the determinants of VC exit dynamics. We find that the VC incubation period is the shortest for single-round syndicated investments. Among portfolio companies receiving VC through multiple rounds, the fastest initial public offerings (IPOs) occur in booming technological industries for which VC firms provided deep pockets at the exit. In contrast, the quickest trade sales occur for the firms where venture capitalists eased the initial cash constraints of the portfolio companies and decreased their financing thereafter. In addition, improved liquidity conditions over the course of investment duration are likely to delay VC write-offs.

Keywords: Venture Capital; IPO; Trade sale; Liquidation; Survival Analysis; Time-varying covariates (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2023-03-30
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2023/Volume43/EB-23-V43-I1-P55.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-23-00050

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().