Do Venture Capital Investors Learn from Public Markets?
61 Pages Posted: 19 May 2016 Last revised: 4 Sep 2017
Date Written: July 26, 2017
We examine whether venture capital (VC) investors learn information contained in public market stock prices. We find that, when public market prices are more informative, VCs are less likely to stage finance startups and syndicate with other VCs. This effect is more pronounced when VCs lack industry-specific expertise, VCs are physically distant from their ventures, and startups are less risky. We also find the sensitivity of VC investment to public market signals is higher when public market prices are more informative. Our paper sheds new light on the real effects of financial markets on capital formation in the private market.
Keywords: Learning; Venture capital; Staging; Syndication; Price informativeness
JEL Classification: G24, G18, G14
Suggested Citation: Suggested Citation