Abstract
The staging of venture capital (VC) financing allows entrepreneurial firms to mitigate the asymmetric information problem while accessing the capital markets. The VC staging signals to the market higher intrinsic quality of the entrepreneurial firms and reduces explicit and implicit costs of accessing public markets. After controlling for endogeneity of VC staging decision, I find that entrepreneurial firms receiving multiple rounds of VC financing are more likely to access funds through IPO rather than acquisition. Such going public firms experience lower underpricing and are valued significantly higher by the market. The higher intrinsic quality of IPO firms financed through multiple VC rounds is later confirmed by their superior post-IPO stock returns, operating performance, and survival rates.
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