Rapidly Evolving Technologies and Startup Exits

69 Pages Posted: 25 Sep 2018 Last revised: 31 Jul 2020

See all articles by Donald E. Bowen III

Donald E. Bowen III

Lehigh University

Laurent Frésard

Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Date Written: July 29, 2020

Abstract

We examine the determinants of startups' exits using novel technology measures based on patent text. We propose that innovation in rapidly evolving technology areas substitute existing technologies, creating a path to an independent market presence. Startups innovating in rapidly evolving areas raise more capital from VCs, grow faster, and exit quicker. These startups are significantly more likely to exit via IPO than sell-out. Innovation in rapidly evolving areas has declined since the 1950s, and particularly so since the late 1990s, suggesting a new technology-based explanation for the decline in IPOs and the surge in sell-outs observed in recent years.

Keywords: Startup Exit, Initial Public Offerings (IPOs), Acquisitions, Sell-Outs, Technology Substitution, Venture Capital

JEL Classification: G32, G34, G24

Suggested Citation

Bowen III, Donald E. and Frésard, Laurent and Hoberg, Gerard, Rapidly Evolving Technologies and Startup Exits (July 29, 2020). Swiss Finance Institute Research Paper No. 19-22, Available at SSRN: https://ssrn.com/abstract=3245839 or http://dx.doi.org/10.2139/ssrn.3245839

Donald E. Bowen III

Lehigh University ( email )

Bethlehem, PA 18015
United States

Laurent Frésard (Contact Author)

Universita della Svizzera italiana (USI Lugano) ( email )

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~hoberg/

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