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Venture capital reputation and investment performance

  • Nahata, Rajarishi
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    I propose a new measure of venture capital (VC) firm reputation and analyze its performance implications on private companies. Controlling for portfolio company quality and other VC-specific factors including experience, connectedness, syndication, industry competition, exit conditions, and investment environment, I find companies backed by more reputable VCs by initial public offering (IPO) capitalization share (based on cumulative market capitalization of IPOs backed by the VC), are more likely to exit successfully, access public markets faster, and have higher asset productivity at IPOs. Further tests suggest VCs' IPO Capitalization share effectively captures both VC screening and monitoring expertise. My findings have financial implications for limited partners and entrepreneurs regarding their VC-sorting activities.

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    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 90 (2008)
    Issue (Month): 2 (November)
    Pages: 127-151

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    Handle: RePEc:eee:jfinec:v:90:y:2008:i:2:p:127-151
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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