The Interaction between Product Market and Financing Strategy: The Role of Venture Capital

43 Pages Posted: 16 Aug 1999

See all articles by Thomas F. Hellmann

Thomas F. Hellmann

University of Oxford - Said Business School; University of Oxford - Said Business School; European Corporate Governance Initiative

Manju Puri

Duke University - Fuqua School of Business; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: May 1999

Abstract

Venture capital is widely believed to be an influential arrangement for the financing of new innovative companies. We examine and find empirical evidence that venture capital financing is related to product market strategies and outcomes of startups. We use a unique hand-collected database of Silicon Valley high technology start-ups, that contains both venture capital and non-venture capital backed firms, and that contains firm-specific data on initial product market strategies, subsequent financing patterns, and the time it takes a firm to bring its product to market. We find that firms that are pursuing an innovator strategy are significantly more likely and faster to obtain venture capital. The presence of a venture capitalist is also associated with a significant reduction in the time taken to bring a product to market, especially for innovators. Further, firms are more likely to list obtaining venture capital as a significant milestone in the lifecycle of the company as compared to other financing events. Our results suggest significant interrelations between investor type and product market dimensions, and a potential role of venture capital for innovative companies.

JEL Classification: G24, G31, G32

Suggested Citation

Hellmann, Thomas F. and Puri, Manju, The Interaction between Product Market and Financing Strategy: The Role of Venture Capital (May 1999). Sauder School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=173655 or http://dx.doi.org/10.2139/ssrn.173655

Thomas F. Hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

European Corporate Governance Initiative ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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