The role of corporate venture capitalists in supporting the growth of their backed start-ups

Ramzi Benkraiem, Duarte Gonçalves and Fatima Shuwaikh
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Ramzi Benkraiem: Audencia Business School
Fatima Shuwaikh: PULV - Pôle Universitaire Léonard de Vinci

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Abstract: Purpose Building on the venture capital (VC) literature, this paper aims to study the impact of the value added by corporate venture capitalists (CVCs) on their funded companies by comparing its IPO valuation with its independent venture capitalists (IVCs) peers. Design/methodology/approach This study uses a sample of 3,719 VC-backed ventures, between the years 1998 and 2020. The empirical analysis focuses on the propensity score matching approach, pairing ventures based on their probability of being funded by CVCs, and consequently, interpret the results derived from the valuation multiple ratios between the "nearest neighbors." Findings This study finds that companies funded by CVCs can achieve higher valuations at their IPO compared to IVC-backed companies. Moreover, CVC-backed companies outperformance is mainly driven by startups which hold a technological fit with their CVC investor, with higher technological overlaps being translated into more significant valuations. Research limitations/implications This study presents systematic evidence to the subject concerning ventures' type of investors and its effect on the startups' IPO valuations. Practical implications This paper contributes to the enrichment of the industry's literacy while also easing entrepreneurs' decisions when choosing a funding partner. CVCs offer a variety of services and support that fits the specific needs of their funded companies. Originality/value To the best of the authors' knowledge, this study is among the first to examine the role of CVCs as a tool to help venture growth.

Keywords: Corporate Venture Capital Independent Venture Capital IPO Valuation Technological Fit; Corporate Venture Capital; Independent Venture Capital; IPO Valuation; Technological Fit; corporate venture capitalists; growth (search for similar items in EconPapers)
Date: 2023-08
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-04369196
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Published in European Business Review, 2023, 35 (5), pp.672-693. ⟨10.1108/EBR-09-2022-0183⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04369196

DOI: 10.1108/EBR-09-2022-0183

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