Time to IPO: A Role of Heterogeneous Venture Capitals
Venture capitals (VC) are often syndicated to invest. The characteristics of each syndicate could vary not only in the number of VCs but also in the heterogeneity of VC types (e.g., bank-dependent, independent, and public etc.) included in a syndicate. This paper empirically studies how these two characteristics are related to the dynamics of client firms’ initial public offerings (IPO). We test whether the IPOs of VC-backed entrepreneurial firms tend to be achieved in shorter periods when they are financed by many and/or heterogeneous VCs. The results of our hazard estimation based on more than 6,800 investment rounds for 615 Japanese VC-backed firms accomplishing IPO over the last decade shows that the hazard ratio of IPO increases not only when the number of VCs in a syndicate increases but also the VCs become more heterogeneous. The latter result shows the existence of the complementarity among heterogeneous VCs in the process of screening and managerial value-added. We also confirm that such a positive impact of heterogeneous VCs becomes more sounding in shorter investment duration and/or in the absence of bank-dependent VC. This implies that complementarity among VCs arises when the uncertainty about venture firms, which diminishes over long investment duration and/or due to the existence of informed VCs, remains to be high.
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