On the Lifecycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms

TLDR: In this article, the authors use U.S. Census data over twenty-five years to understand the lifecycle dynamics of VC- and non-VC-financed firms, and find both successful and failed VC- financings achieve larger scale but are not more profitable at exit than matched non-VFC-financings.

Abstract: We use U.S. Census data over twenty-five years to understand the lifecycle dynamics of VC- and non-VC-financed firms. We find both successful and failed VC-financed firms achieve larger scale but are not more profitable at exit than matched non-VC-financed firms. Cumulative failure rates of VC-financed firms are lower, with the difference being driven largely by lower failure rates in the initial years after receiving VC. Our results are not driven by VCs disguising failures as acquisitions or by certain types of VCs. Finally, the performance difference between VC- and non-VC-financed firms narrows in the post-internet bubble years, but does not disappear.

Figures

Table IX. Matched sample firm size and profitability regressions with VC reputation

Table IV. Matched sample average and standard deviations of firm size and profitability

Figure 1. Average size of all VC- and non-VC-financed firms in the LBD

Table VIII. Comparing VC- and non-VC-financed firms at exit

Table III. Matched sample firm size and profitability regressions

Table VII. Matched sample firm exit event multinomial logits