Why do Some Venture Capitalists Cash Out While Others Retain their Stakes? -- How Fund Dynamics Influence Venture Capital Exit Decisions

39 Pages Posted: 26 Dec 2013

See all articles by Maximilian Schmidt

Maximilian Schmidt

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS)

Carolin Bock

Technische Universität Darmstadt

Date Written: December 20, 2013

Abstract

Although venture capital (VC) exits have been studied for over 20 years, major drivers are still in question. We examine the determinants of exit timing in initial public offerings (IPOs). The results from a proprietary dataset of 292 U.S. VC-backed IPOs from 1991 to 2008 imply that VC firm characteristics and fund dynamics have a significant influence on the exit extent and may not always be in line with limited partners’ interests. In particular, first-time funds keep their shares longer after an IPO, whereas funds satisfied with current fund performance cash out soon after the end of the lockup period.

Keywords: Venture Capital, IPO, Exit, General partner, Limited partner, Agency Theory, Prospect Theory

JEL Classification: G11, G24, G32

Suggested Citation

Schmidt, Maximilian and Bock, Carolin, Why do Some Venture Capitalists Cash Out While Others Retain their Stakes? -- How Fund Dynamics Influence Venture Capital Exit Decisions (December 20, 2013). Available at SSRN: https://ssrn.com/abstract=2370655 or http://dx.doi.org/10.2139/ssrn.2370655

Maximilian Schmidt

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS) ( email )

Arcisstraße 21
München, 80333
Germany

Carolin Bock (Contact Author)

Technische Universität Darmstadt ( email )

Hochschulstr. 1
Darmstadt, 64289
Germany

HOME PAGE: http://www.ent.tu-darmstadt.de

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