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Can venture capital funds pick winners? Evidence from pre-ipo survivle rates and post-ipo performance

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  • Hedva Ber

    (Bank of Israel)

  • Yishay Yafeh

    (Hebrew University of Jerusalem)

Abstract

This paper documents pre- and post-IPO (initial public offering) differences in the performance of venture capital financed Israeli companies in comparison with other high-tech firms during the period 1991 to 2000. Using a newly constructed database we find that: (1) the probability of survival until the IPO stage is higher for venture-backed companies, and (2) according to several different measures, conditional on making an IPO, the post-listing performance of venture-backed companies is not statistically different from that of companies financed by non-venture financiers throughout the 1990s. One interpretation of these findings is that venture capital funds increase the survival rates of young technology-intensive firms; another is that there are fundamental - though not always observable - differences between venture-backed companies and other high technology firms and venture capital funds select companies which are inherently more likely to go public. Both interpretations indicate that venture-backed companies are associated with low "infant mortality," but not with stellar post-IPO performance

Suggested Citation

  • Hedva Ber & Yishay Yafeh, 2007. "Can venture capital funds pick winners? Evidence from pre-ipo survivle rates and post-ipo performance," Israel Economic Review, Bank of Israel, vol. 5(1), pages 23-46.
    • Handle: RePEc:boi:isrerv:v:5:y:2007:i:1:p:23-46
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    Cited by:

    1. Mojca Svetek, 2023. "The Role of Entrepreneurs’ Perceived Competence and Cooperativeness in Early-Stage Financing," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2047-2076, November.

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