Assessing the venture capital legacy : an investigation of post-IPO performance and impact

Abstract

While extensive literature documents the venture capital impact around the initial public offering, little is known about the enduring effects of venture financing. This paper follows the post-IPO performance of venture-backed U.S. firms in different IPO cohorts from 1970 to 2006, and measures the duration of any venture capital advantages after the IPO. Venture capital strongly correlates with higher R&D and market-to-book ratios ("q"), and venture-backed firms grow faster and perform better particularly in high-tech industries. This apparent advantage for venture-backed firms remains for years following the IPO.