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Investment and returns in successful entrepreneurial sell-outs

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  • Wiltbank, Robert
  • Dew, Nicholas
  • Read, Stuart

Abstract

This paper examines returns to capital invested in new ventures. Across theoretical lines of inquiry, outcomes of new venture growth, valuation, and consequent return to entrepreneurs are generally assumed to be a function of access to equity capital. Drawing on a hand-gathered dataset comprising the universe of 3160 private firms acquired by U.S. publicly-traded firms during the years 1996–2006, we analyze a population of heterogeneous investment profiles with clear terminal valuations, lifespans, and distributions to entrepreneurs. The results paint a picture of steeply diminishing returns to invested capital, where the primary benefit of equity investment is accelerated liquidity, not terminal value of the venture or entrepreneur returns.

Suggested Citation

  • Wiltbank, Robert & Dew, Nicholas & Read, Stuart, 2015. "Investment and returns in successful entrepreneurial sell-outs," Journal of Business Venturing Insights, Elsevier, vol. 3(C), pages 16-23.
    • Handle: RePEc:eee:jobuve:v:3:y:2015:i:c:p:16-23
    DOI: 10.1016/j.jbvi.2015.02.002
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    Cited by:

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    2. Gala, Kaushik & Schwab, Andreas & Mueller, Brandon A., 2024. "Star entrepreneurs on digital platforms: Heavy-tailed performance distributions and their generative mechanisms," Journal of Business Venturing, Elsevier, vol. 39(1).
    3. Silva, Pedro Mendonça & Moutinho, Victor Ferreira & Moreira, António Carrizo, 2022. "Do social and economic factors affect the technical efficiency in entrepreneurship activities? Evidence from European countries using a two-stage DEA model," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    4. Patel, Pankaj C. & João Guedes, Maria & Pagano, Michael S. & Olson, Gerard T., 2020. "Industry profitability matters: The value of sustainable growth rate and distance from bankruptcy as enablers of venture survival," Journal of Business Research, Elsevier, vol. 114(C), pages 80-92.

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