How Well do Venture Capital Databases Reflect Actual Investments?
Steven N. Kaplan
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Stockholm School of Economics; University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); Stockholm School of Economics - Department of Finance
Berk A. Sensoy
Ohio State University - Fisher College of Business
Researchers increasingly have used the two primary venture capital databases - VentureOne and Venture Economics - to study venture capital (VC) financings. These data are largely self-reported. In this paper, we compare the actual contracts in 143 VC financings to their characterizations in the databases. The databases exclude roughly 15% of the financing rounds. The Venture Economics database oversamples larger rounds and California companies while the financing rounds included in the VentureOne database exhibit no significant bias. The databases provide unbiased, but noisy measures of financing amounts and their valuations. The databases also are less successful in measuring milestone rounds. The VentureOne database oversamples valuations for highly valued firms even controlling for firm characteristics. We discuss the implications of these findings for researchers and practitioners.
Number of Pages in PDF File: 30
Keywords: venture capital, databases, investments
JEL Classification: G24working papers series
Date posted: October 22, 2006
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