How Do Corporate Venture Capitalists Create Value for ...

experience similar time from first venture investment till exit 2.7-2.9 years for acquired firms and 4.2
years for IPO firms.
Third, the reputation of existing IVCs is similar across CVC and IVC backed entrepreneurial firms
that went public; it is also higher for CVC backed firms that were acquired or written off compared to
IVC backed firms. This suggests that CVCs prompt high reputation IVC to co-invest with them.
Finally, Table 4a allows us to compare the characteristics of CVC backing for various sub-samples
of entrepreneurial firms. We find that CVCs on average enter later both in terms of entrepreneurial firms’
age and entrance round number into IPO firms compared to entrance into firms that were later acquired or
written off. Further, CVCs invest more in companies that later go public than in those that were later
acquired or written off. In addition, we observe that IPO companies backed by CVCs enjoy a higher
number of VC corporate parents in a related industry compared to IVC backed acquired firms. The latter
suggests that industry match with the corporate parent aids the entrepreneurial firm in going public and
accessing the secondary market.
5.2 Multivariate Analysis of Exit Strategies
The univariate analysis suggests that CVC backed entrepreneurial firms have a higher probability of
successful exit as measured by IPO or acquisition. In this section we present a more rigorous analysis of
the exit strategies where along with CVC backing we control for a number of other firm characteristics
that can potentially affect the likelihood of a firm to have having a successful exit.
Panel A of Table 4b presents a probit analysis of the propensity for a successful exit. The dependant
variable is a dummy equal to 1 if the entrepreneurial firm has an IPO or acquisition and 0 if it is written
off by the venture capitalist. To evaluate the effect of CVC backing, we consider various measures of the
degree of firm backing by corporate venture capitalists (e.g., we want to discriminate between
entrepreneurial firms entirely financed by CVCs versus those that only obtained 5% from CVCs and the
remaining investment was provided by IVCs). Here we control for the reputation of existing independent
venture capitalists, log of total dollar amount invested by all VCs, and the age of the entrepreneurial firm.
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