Abstract
Investment contract duration is a key parameter for venture capital funds operation. Variables influencing the decision around this parameter are usually treated in general principles in the classical financial literature leaving plenty of room for context sensitive research. As such, we studied variables influencing investment contract duration by investigating the performance of mature Portuguese firms that have been (partially) held by venture capital funds. Using a sample of 38 firms, sold out by venture capital funds between 1995 and 2004 we evaluated the performance of these firms using performance and sustainability indicators. We found evidence that sales growth, exports, book value, headcount and a good coverage of ISO standards implementation influenced the investment contract duration.
Highlights
This paper examines the impact of venture capital as a value added partner to Portuguese firms in maturity stage, especially in traditional business activities and test if whether or not this is an enduring impact, assessed by valuation increase of these firms after four years of an exit
Regression results – we used linear regression to estimate the influence of independent variable ‘duration on contract’ on the variables sales growth (SG) (DV1), external markets sales evolution (DV2), EBITDA evolution (DV3), book value evolution (DV4), headcount evolution (DV5) and number of quality certifications (DV6)
Considering two of the most used indicators in firms’ relative or comparative valuation we concluded that price sales ratio (PSR) and price book value (PBV) would have at least a positive evolution for this sample’s companies
Summary
This paper examines the impact of venture capital as a value added partner to Portuguese firms in maturity stage, especially in traditional business activities and test if whether or not this is an enduring impact, assessed by valuation increase of these firms after four years of an exit. We chose this type of firms – companies in maturity – for two main reasons:. Survey 2 was sent to portfolio companies’ managers but the rate of response was not representative and the data collected was not used to test variables
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