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Investment, Duration, and Exit Strategies for Corporate and Independent Venture Capital-backed Start-ups

Bing Guo (), Yun Lou () and David Perez-Castrillo ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We propose a model of investment, duration, and exit strategies for start-ups backed by venture capital (VC) funds that accounts for the high level of uncertainty, the asymmetry of information between insiders and outsiders, and the discount rate. Our analysis predicts that start-ups backed by corporate VC funds remain for a longer period of time before exiting and receive larger investment amounts than those financed by independent VC funds. Although a longer duration leads to a higher likelihood of an exit through an acquisition, a larger investment increases the probability of an IPO exit. These predictions find strong empirical support.

Pages: 59
Date: 2012-01-25
New Economics Papers: this item is included in nep-bec and nep-ent
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Related works:
Journal Article: Investment, Duration, and Exit Strategies for Corporate and Independent Venture Capital-Backed Start-Ups (2015) Downloads
Working Paper: Investment, Duration, and Exit Strategies for Corporate and Independent Venture Capital-backed Start-ups (2012) Downloads
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