Investment, Duration, and Exit Strategies for Corporate and Independent Venture Capital‐Backed Start‐Ups

Guo, Bing; Lou, Yun; Pérez‐Castrillo, David

doi:10.1111/jems.12097

Cited by 51 publications

(59 citation statements)

References 53 publications

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“…This issue is particularly interesting because the management of a PE-backed firm can be influenced by the existence of a preliminary agreement on how the PE investor will exit. Additionally, some papers (e.g., Sørensen, 2007;Guo et al, 2012) have recently noted a relationship between some PE investment characteristics and the exit strategy. For these reasons, we develop our final hypothesis as follows:…”

Section: Literature Review and Hypothesesmentioning

confidence: 98%

Do the effects of private equity investments on firm performance persist over time?

Meles

Monferrà

Verdoliva

2014

Applied Financial Economics

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This study examines whether the effect of private equity (PE) investments persists over time or wears off after the PE investors exit. Unlike previous studies that focus on the PE-backed initial public offerings (IPOs), we constructed a unique and distinctive dataset comprising PE investments exiting both via IPO and other common ways (i.e., trade sale, secondary buy-out and buy-back). Consistent with Jain and Kini (1995), we observe that PE-backed firms outperform other firms. Our results shed light on existing literature because we find that whether PE investments continue to benefit the portfolio firms is strictly related to the type (venture capital versus buy-out) and length of the PE investment, the nature of the PE investor (bank-based versus nonbank based), and the exit strategy (IPO versus other exit strategies).

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Section: Literature Review and Hypothesesmentioning

confidence: 98%

Do the effects of private equity investments on firm performance persist over time?

Meles

Monferrà

Verdoliva

2014

Applied Financial Economics

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“…In fact, corporate investors have less time constraints in their investment horizon (Paik and Woo 2017) which enables ventures and subsequently later unicorns to spend more time to develop products and services which could lead to a superior quality of the latter which should also be beneficial for the development of unicorns. Furthermore, more patient CVC investors are willing to remain invested for a longer time than independent VC funds with a finite lifetime and hence enable high follow-on funding rounds instead of promoting an exit through an IPO which gives unicorns the possibility to grow (Wadhwa and Phelps 2009;Guo et al 2015).…”

Section: Corporate Venture Capitalmentioning

confidence: 99%

Unicorns—what drives multibillion-dollar valuations?

Bock

Hackober

2020

Bus Res

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The number of ventures with a market value of one billion USD or more has considerably increased during the last decade. Driven by new technologies and business models, these ventures became an integral part of our daily life. Particularly, the number of unicorns based in China and other regions outside the US raised during recent years whereas the phenomenon was initially limited to the US region. Existing research has mainly focused on descriptive approaches to examine the rise of these ventures but lacks knowledge on the drivers of this phenomenon. We address these research gaps and investigate the underlying factors that foster the emergence of such high-valued ventures. Our results present several economic environmental as well as investor-related factors that impact the likelihood for a venture to achieve a market valuation of more than one billion USD. Subsequently, we derive theoretical and practical implications that may foster the future emergence of new high-valued ventures, covering regulatory, investor-and venturespecific aspects.

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“…Guo et al [11] find that the duration and size of an investment will influence the choice of exit. Ozmel et al [12] [13] demonstrate that the number of financing rounds affects the choice of exit.…”

Section: Which Factors Infect Exitsmentioning

confidence: 99%

The Influence of Macro Factors on the Exit of Venture Capital—Take the Chinese Market as an Example

Yang¹

2018

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We control the investor and investment-specific factors to test how macro factors affect the exit of venture capital. After using a sample of 28668 VC investments in China, we discover that macro factors such as legal rights and GDP growth have a positive impact on successful exit, which means that macro factors can increase the likelihood of successful exit. Surprisingly, market liquidity which is one kind of macro factors can significantly reduce the likelihood of trade sale, which is different from our predictions. In addition, we find that the VC-backed firms with more amount investment and bigger syndicate size will have more opportunities to IPO, but the VC investors with more experience will decrease the likelihood of trade sale and liquidation.

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Investment, Duration, and Exit Strategies for Corporate and Independent Venture Capital‐Backed Start‐Ups

Cited by 51 publications

References 53 publications

Do the effects of private equity investments on firm performance persist over time?

Do the effects of private equity investments on firm performance persist over time?

Unicorns—what drives multibillion-dollar valuations?

The Influence of Macro Factors on the Exit of Venture Capital—Take the Chinese Market as an Example

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