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Are particular industries more likely to succeed? A comparative analysis of VC investment in the US and Europe

  • Kraeussl, Roman
  • Krause, Stefan

The objective of this study is to determine whether specific industries across countries or within countries are more likely to reach a stage of profitability and make a successful exit. In particular, we assess whether firms in certain industries are more prone to exit via IPO, be acquired, or exit through a leveraged buy-out. We are also interested in analyzing whether substantial differences across industries and countries arise when looking separately at the success' rate of firms which have received venture funding at the early seed and start-up stages, vis-à-vis firms that received funding at later stages. Our results suggest that, inasmuch as some of the differences in performance can be explained by country-specific factors, there are also important idiosyncratic differences across industries: In particular, firms in the biotech and the medical / health / life science sectors tend to be significantly more likely to have a successful exit via IPO, while firms in the computer industry and communications and media are more prone to exit via merger or acquisition. Key differences across industries also emerge when considering infant versus mature firms, and their preferred exit.

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Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2010/02.

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Date of creation: 2010
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Handle: RePEc:zbw:cfswop:201002
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  1. Elisabete Gomes Santana Felix & Cesaltina Pires & Mohamed Azzim Gulamhussenb, 2007. "The Determinants of Venture Capital in Europe - Evidence Across Countries," CEFAGE-UE Working Papers 2007_01, University of Evora, CEFAGE-UE (Portugal).
  2. Cochrane, John H., 2005. "The risk and return of venture capital," Journal of Financial Economics, Elsevier, vol. 75(1), pages 3-52, January.
  3. Murray, Gordon C. & Marriott, Richard, 1998. "Why has the investment performance of technology-specialist, European venture capital funds been so poor?," Research Policy, Elsevier, vol. 27(9), pages 947-976, December.
  4. Kristiina Raade & Catarina Dantas Machado Rosa, 2008. "Recent Developments in the European Private Equity Markets," European Economy - Economic Papers 319, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  5. Paul Gompers & Anna Kovner & Josh Lerner & David Scharfstein, 2005. "Venture Capital Investment Cycles: The Impact of Public Markets," NBER Working Papers 11385, National Bureau of Economic Research, Inc.
  6. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
  7. Robert J. Gordon, 2002. "Technology and Economic Performance in the American Economy," NBER Working Papers 8771, National Bureau of Economic Research, Inc.
  8. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
  9. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
  10. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
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