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Venture capital activities under uncertainty: US and UK investors behavior

Author

Listed:
  • Fatima Shuwaikh

    (Pôle Universitaire, Research Center
    Univ Paris Est Créteil, IRG)

  • Souad Brinette

    (OCRE, EDC Paris Business School)

  • Sabrina Khemiri

    (Université Paris-Saclay, Univ Evry, IMT-BS, LITEM)

  • Rita Grego De Castro

    (Universidade Católica Portuguesa Catolica Lisbon School of Business and Economics Palma de Cima)

Abstract

We investigate how in the context of Corporate Venture Capital (CVC), the investment decisions affect the likelihood of their subsequent exit strategies. We use OLS and probit regression as well as Weibull distribution of residual values, given its reliability and validity for studying lifetime analysis. Based on a sample of 8722 VC-backed ventures with the first investment dates between 1999 and 2018 in United States (US) and United Kingdom (UK), the results show that the presence of CVCs positively affects the funding amounts and the duration of the investment. CVC funds are more generous and more patient than Independent Venture Capital (IVC) funds regarding their investments in ventures. Moreover, the findings provide evidence that the exit strategies are directly influenced by the funding amounts and the duration of the investment which are influenced, in turn, by the fund type. Greater funding increases the likelihood of IPO exit which is reduced by longer investment duration. Our results are robust to alternative estimation methods, namely two-stage treatment-effects regressions. These results help the various stakeholders (VC funds, investors, ventures) make crucial decisions regarding investment amounts and duration, and exit.

Suggested Citation

  • Fatima Shuwaikh & Souad Brinette & Sabrina Khemiri & Rita Grego De Castro, 2024. "Venture capital activities under uncertainty: US and UK investors behavior," Annals of Operations Research, Springer, vol. 334(1), pages 885-917, March.
    • Handle: RePEc:spr:annopr:v:334:y:2024:i:1:d:10.1007_s10479-022-04962-3
    DOI: 10.1007/s10479-022-04962-3
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    More about this item

    Keywords

    Corporate Venture Capital; Independent Venture Capital; Funding; Duration; Exit strategies;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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