Determinants and effects of Venture Capital and Private Equity ...

The methodology adopted has some drawbacks mainly related to the usage of sole public
data. Many others studies take advantage of questionnaires sent directly to VCs and PE funds
to acquire more in depth information as for financing terms of the investment, firms’ equity
ownership, contingencies to future financing. However, the validity of the samples obtained
might be affected by: (1) survivorship bias, in the way that the survey is delivered to investors
who are still in business, (2) positive bias, because it is likely VCs and PE funds report
performance of only those firms doing well. Conversely, our dataset potentially addresses these
issues since it includes information for firms which are either undertaking winding‐up
procedures or did not perform well. Nevertheless, as already mentioned, we could not track
down the financial data of each and every company due to two main reasons: (1) the source at
our disposal was not comprehensive of all the activities, (2) especially for small and medium‐
size companies the amount of information provided has a positive relation with costs to
produce and publish its financial data and eventually rises the awareness among its own
competitors.
5.2 Data
Figure 2 and table 1 aim to provide an overview of the Italian market for Venture Capital
and Private Equity, as the one captured by the firms included in our dataset over the survey
period 1997‐2008. It gives some indications on how the industry behaved as for geographical
distribution, typology of investment and preferred sectors of activity. Not surprisingly the North
of Italy, with 101 deals, shows a very high grade of entrepreneurship with Lombardia being the
region leader in Italy in terms of investments attracted. The Centre Italy accounts for 32,5% of
the market where Emilia‐Romagna and Toscana played a relevant role. The South Italy is
characterized by a low level of interest: Campania, Puglia and Basilicata saw one investment
each while Calabria three. However, since we did not include publicly‐controlled investors in
our survey the flow of investments for Southern regions should be considered underestimated.
Not surprisingly either, from figure 2 we see that sectors with a high potential of innovation
were preferred: as a matter of fact, DL sector, by its own definition, it’s involved in activities
more prone to be technology driven, while companies belonging to sector K work in fields such
as IT solutions for firms and consultancy services where intellectual capital is fundamental; at
the same time within the more traditional DK sector there is a broad range of activities which
imply an intensive usage of technology.
Panel A of Table 2 reports the summary statistics on the control sample. Data are averages
over the period before the involvement of the external financer. The time span considered is
not constant over the firms but it’s calculated upon the first year in which the firm is present in
the database and the year the deal takes place. The median firm of this group records a value of
sales of € 12.2 million, total assets of 10.4 millions, 50 employees and is 20 years old. Intangible
assets represent less than 5% of intangibles and fixed assets. As for profitability, the return on
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