Venture Capitalist Participation and the Performance of IPO Firms: Empirical Evidence from France, Germany, and the UK

Abstract

The paper investigates the impact of venture capitalists on the operating and market performance of firms going public by using a hand-collected international dataset of venture- and non venture-backed IPOs at the German Neuer Markt, the French Nouveau Marche, and the British techMARK. The study focuses on differences in the issuer and offering characteristics as well as in balance sheet data. Moreover, the influence of venture capitalists is assessed via a number of variables reflecting the quality of venture-backing, such as the pre- and post-issue shareholdings, board membership, age, syndication, organizational form, and overall participation in IPOs of the sample. Using the international dimension of the investigation, the involvement of venture capitalists in IPOs across countries is considered as an additional proxy for the experience of investors. The overall findings suggest that venture-backed firms do not generally outperform those without venture-backing. Instead, merely a subgroup of internationally operating venture capitalists has positive effects on both the operating and market performance of portfolio firms. The outcome is interpreted as evidence for the heterogeneity of venture capitalists in the European market that is currently undergoing a consolidation process.