What are Firms? Evolution from Early Business Plans to Public Companies
53 Pages Posted: 14 Apr 2006
There are 2 versions of this paper
Should Investors Bet on the Jockey or the Horse? Evidence from the Evolution of Firms from Early Business Plans to Public Companies
Date Written: October 2006
Abstract
We study how firm characteristics evolve from early business plan to initial public offering (IPO) to public company for 50 venture capital (VC) financed companies. We describe the financial performance, line of business, point(s) of differentiation, non-human capital assets, growth strategy, top management, and ownership structure. The most striking finding is that firm business lines or ideas remain remarkably stable from business plan through public company. Within those business lines, non-human capital aspects of the businesses are more stable than human capital aspects. In the cross-section, firms with more alienable assets experience more managerial turnover suggesting that specific people becomes less critical as firms establish non-human assets. We obtain qualitatively similar results to those in our primary sample for all non-financial start-up IPOs in 2004 - both VC- and non-VC backed. This suggests that our main results are not specific to the presence of a VC or to the time period. We discuss how our results relate to theories of the firm and to VC investment decisions.
Keywords: Entrepreneurship, Venture Capital, Theory of the firm
JEL Classification: M13, G24, D23, L20
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Steven N. Kaplan and Per Strömberg
-
By Steven N. Kaplan and Per Strömberg
-
Venture Capital and the Structure of Capital Markets: Banks Versus Stock Markets
By Ronald J. Gilson and Bernard S. Black
-
Money Chasing Deals?: The Impact of Fund Inflows on Private Equity Valuations
By Paul A. Gompers and Josh Lerner
-
Private Equity Performance: Returns, Persistence and Capital Flows
-
Private Equity Performance: Returns, Persistence and Capital
-
The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?
-
Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence
By Thomas F. Hellmann and Manju Puri