Can Venture Capital Funds Pick Winners? Evidence from Pre-IPO Survival Rates and Post-IPO Performance

24 Pages Posted: 25 Nov 2012

See all articles by Hedva Ber

Hedva Ber

Bank of Israel - Research Department

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2007

Abstract

This paper documents pre- and post-IPO (initial public offering) differences in the performance of venture capital financed Israeli companies in comparison with other high-tech firms during the period 1991 to 2000. Using a newly constructed database we find that: the probability of survival until the IPO stage is higher for venture-backed companies, and according to several different measures, conditional on making an IPO, the post-listing performance of venture-backed companies is not statistically different from that of companies financed by non-venture financiers throughout the 1990s. One interpretation of these findings is that venture capital funds increase the survival rates of young technology-intensive firms; another is that there are fundamental – though not always observable – differences between venture backed companies and other high technology firms and venture capital funds select companies which are inherently more likely to go public. Both interpretations indicate that venture-backed companies are associated with low 'infant mortality,' but not with stellar post-IPO performance.

Suggested Citation

Ber, Hedva and Yafeh, Yishay, Can Venture Capital Funds Pick Winners? Evidence from Pre-IPO Survival Rates and Post-IPO Performance (November 2007). Israel Economic Review, Vol. 5, No. 1, pp. 23-46, 2007, Available at SSRN: https://ssrn.com/abstract=2179018

Hedva Ber (Contact Author)

Bank of Israel - Research Department ( email )

PO Box 780
Jerusalem 91007
Israel
+97 2 6552 608 (Phone)
+97 22 6552 660 (Fax)

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3081 (Phone)
+972 2 588 1341 (Fax)

HOME PAGE: http://bschool.huji.ac.il/facultye/yafeh/

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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