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Annualized Returns of Venture-Backed Public Companies Categorized by Stage of Financing: An Empirical Investigation of IPOS in the Last Three Decades

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  • Yochanan Shachmurove

    (University of Pennsylvania)

Abstract

Although the national media has given increased attention to the venture capital process, misconceptions continue to proliferate. One often hears about the incredible capital gains of IPO share prices. This paper refutes the myth that investors demand very high rates of return to compensate for the risks involved in financing ventures. The paper investigates actual performance of 3,063 Initial Public Offerings of companies that were backed by venture capital from 1968 until 1998 stratified by current actively and inactively traded companies and by stages of financing. The main findings are that annualized returns are different for current actively and inactively traded firms and for many of the stages of financing but that they are much lower than the ones reported by the media and the venture capital literature.

Suggested Citation

  • Yochanan Shachmurove, 2001. "Annualized Returns of Venture-Backed Public Companies Categorized by Stage of Financing: An Empirical Investigation of IPOS in the Last Three Decades," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 6(1), pages 44-58, Spring.
    • Handle: RePEc:pep:journl:v:6:y:2001:i:1:p:44-58
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    References listed on IDEAS

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    Cited by:

    1. Amir Shachmurove & Yochanan Shachmurove, 2004. "Annualized and Cumulative Returns on Venture-Backed Public Companies Categorized by Industry," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(3), pages 41-60, Fall.
    2. Yochanan Shachmurove, 2009. "Economic Geography, Venture Capital and Focal Points of Entrepreneurial Activity," PIER Working Paper Archive 09-032, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Amir Shachmurove & Yochanan Shachmurove, 2004. "Choosing Between Promising and Crowded Industries: How Does the Venture Capital Industry Fare in Each?," PIER Working Paper Archive 04-044, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    4. Yochanan Shachmurove, 2004. "The Reality of IPO Performance: An Empirical Study of Venture-Backed Public Companies," PIER Working Paper Archive 04-030, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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    More about this item

    Keywords

    Venture Capital; Venture-Backed Companies; Initial Public Offering; IPO; MBO; Seed Financing; Mezzanine;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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