How Do Corporate Venture Capitalists Create Value for ...

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Table 4a Exit Strategies for CVC Backed and IVC Backed Firms: Univariate Analysis This table reports the descriptive statistics for the success rates and exit strategies of entrepreneurial firms with venture capital backing from 1980 to 2004. Panel A presents the characteristics of firms that went public; Panel B looks at the acquired firms; Panel C presents the characteristics of firms that were written-off by venture capitalists; and Panel D presents active investments. An entrepreneurial firm is considered to be CVC backed if it has at least one CVC investor, and IVC backed if it enjoyed only IVC investments. The main data source is VentureExpert database of SDC Platinum. The data was cross-references with other data sources (e.g., Jay Ritter data on firm age, SDC Platinum IPO list, D&B dataset, and CorpTech Explore database). ***, **, and * indicate significance of t-statistics for the test of difference in means between two samples at the 1, 5, and 10 percent levels, respectively. Panel A: IPO Firms Panel B: Acquired Firms Panel C: Writeoffs Panel D: Active investments CVC IVC Difference CVC IVC Difference CVC IVC Difference CVC IVC Difference Number of Portfolio Firms 590 2585 328 1620 721 3462 1587 11740 Share of Portfolio Firms 18.289 13.32 4.969*** 10.1674 8.3475 1.820*** 22.3497 17.839 4.511*** 49.194 60.494 -11.30*** Round Number of CVC Entrance 3.068 2.427 2.632 2.357 Firm’s Age at CVC Entrance Date 4.323 2.490 3.685 3.719 CVC Amount Invested ($mil.) 10.364 6.931 5.583 5.822 CVCs Share in All VC Investments (%) 21.656 22.151 19.386 22.197 Number of CVC Investors 1.517 1.360 1.408 1.332 Number of CVC Investors in the Same Industry 2 digit SIC 0.853 0.571 0.621 0.645 3 digit SIC 0.691 0.405 0.443 0.514 4 digit SIC 0.379 0.119 0.152 0.192 Fama-French industry 0.842 0.602 0.629 0.693 Year From First Investment to Exit 4.235 4.128 0.108 2.947 2.776 0.172 4.401 3.963 0.438*** 6.821 8.321 -1.501*** Firm Age at Exit Date 5.902 9.839 -3.938*** 4.959 7.387 -2.427*** 6.654 9.231 -2.576*** 5.455 7.069 -1.614*** Percentage of Internet Companies 42.881 19.072 23.810*** 66.159 39.877 26.282*** 52.705 27.499 25.206*** 55.829 31.797 24.031*** Total Number of VC Invetsors 20.949 9.146 11.803*** 16.058 6.945 9.113*** 18.132 8.322 9.810*** 14.744 5.608 9.135*** Total Number of Rounds 5.195 3.304 1.891*** 3.957 2.691 1.266*** 4.433 3.090 1.343*** 3.945 2.453 1.493*** Total Amount Invested by All VCs ($mil.) 56.352 31.476 24.876*** 45.196 19.274 25.922*** 38.367 18.171 20.197*** 40.678 14.100 26.579*** Average Reputation of Existing IVCs Age 14.421 14.663 -0.242 13.836 15.246 -1.411*** 14.427 14.729 -0.302 13.379 13.416 -0.037 Total Amount Invested Since 1965 ($mil.) 451.131 425.802 25.329* 906.988 692.629 214.359** 859.048 627.278 231.771** 989.780 734.091 255.688** Number of Financed Rounds 383.386 337.095 46.291* 563.809 488.062 75.747* 534.652 430.046 104.606** 594.415 465.823 128.593*** Funds Raised Over 5 Years ($mil.) 420.230 392.855 27.375* 690.291 531.699 158.592** 652.828 491.966 160.862*** 630.473 494.915 135.558** Funds Raised Since 1965 ($mil.) 600.385 564.085 36.300 831.413 624.995 206.418** 808.808 620.453 188.355** 739.198 604.497 134.701** 40
Table 4b Exit Strategies for CVC Backed and IVC Backed Firms: Multivariate Analysis This table reports the multivariate analysis of the success rates and exit strategies of entrepreneurial firms with venture capital backing from 1980 to 2004. Panel A presents probit analysis of propensity of an entrepreneurial firm for successful exit (IPO or Acquisition). The dependant variable is 1 for entrepreneurial firms that went public or were acquired and 0 if the VC investment was written off. Panel B presents probit analysis of propensity of an entrepreneurial firm to have IPO vs Acquisition. The dependant variable is 1 for entrepreneurial firms that went public and 0 for acquired firms. Panel C presents the regression analysis of the number of years from first VC investment till successful exit (IPO or Acquisition). An entrepreneurial firm is considered to be CVC backed if it has at least one CVC investor, and IVC backed if it enjoyed only IVC investments. The t-statistics are reported in parentheses. ***, **, and * indicate significance of t-statistics for the test of difference in means between two samples at the 1, 5, and 10 percent levels, respectively. Panel A: Propensity for Successful Exit Panel B: Propensity to Have IPO vs. Acquisition Panel C: Time From First VC Investment to Exit (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) IPO/ Acquisition Dummy -0.681 -0.687 -0.689 -0.684 (5.77)*** (5.82)*** (5.83)*** (5.80)*** CVC Backing Dummy 0.011 -0.065 0.714 (0.14) (0.85) (4.09)*** CVC Share of Total VC 0.285 0.510 -0.392 Investment (1.46) (2.39)** (1.92)* CVC Originated 0.061 -0.099 0.102 Investment Dummy (0.63) (0.95) (0.43) Number of CVC -0.006 -0.024 0.555 (0.10) (0.41) (4.13)*** CVC-Firm Industry Match -0.008 -0.041 -0.013 0.004 0.057 -0.039 0.040 0.051 -0.269 -0.111 -0.048 -0.543 (0.09) (0.55) (0.17) (0.04) (0.88) (0.67) (0.72) (0.62) (2.83)*** (2.45)*** (2.52)*** (2.88)*** Log(Total Amount 0.222 0.222 0.222 0.222 0.089 0.088 0.087 0.088 0.205 0.226 0.226 0.207 Invested by VCs) (17.63)*** (17.82)*** (17.81)*** (17.63)*** (6.24)*** (6.24)*** (6.24)*** (6.20)*** (4.93)*** (5.53)*** (5.54)*** (5.03)*** Company Age at First Investment Date 0.011 0.011 0.011 0.011 -0.011 -0.011 -0.011 -0.011 0.078 0.076 0.077 0.078 (4.60)*** (4.62)*** (4.60)*** (4.60)*** (4.53)*** (4.44)*** (4.50)*** (4.51)*** (8.70)*** (8.54)*** (8.55)*** (8.66)*** Internet Dummy 0.654 0.652 0.655 0.654 0.298 0.287 0.294 0.296 -1.050 -1.005 -1.012 -1.060 (8.37)*** (8.36)*** (8.39)*** (8.36)*** (4.46)*** (4.30)*** (4.42)*** (4.44)*** (6.91)*** (6.60)*** (6.68)*** (6.96)*** Avg Age of Existing IVCs 0.012 0.013 0.012 0.012 0.002 0.003 0.002 0.002 0.037 0.035 0.036 0.036 (4.33)*** (4.39)*** (4.35)*** (4.33)*** (1.00) (1.20) (0.97) (1.02) (4.50)*** (4.40)*** (4.44)*** (4.53)*** 6-month EW Return of FF Industry Portfolio Startup/Seed Stage at First Round of VC Financing Early Stage at First Round of VC Financing Expansion Stage at First Round of VC Financing Later Stage at First Round of VC Financing 0.767 0.764 0.767 0.768 0.783 0.779 0.782 0.782 -0.912 -0.884 -0.890 -0.907 (7.99)*** (7.96)*** (7.99)*** (8.00)*** (7.38)*** (7.35)*** (7.37)*** (7.37)*** (3.81)*** (3.70)*** (3.72)*** (3.80)*** -0.506 -0.508 -0.508 -0.505 -0.739 -0.748 -0.736 -0.740 0.481 0.499 0.492 0.489 (7.58)*** (7.60)*** (7.59)*** (7.57)*** (8.58)*** (8.69)*** (8.55)*** (8.59)*** (2.34)** (2.44)** (2.40)** (2.39)** -0.455 -0.456 -0.456 -0.455 -0.617 -0.629 -0.616 -0.619 0.215 0.250 0.240 0.235 (7.55)*** (7.56)*** (7.56)*** (7.55)*** (8.35)*** (8.48)*** (8.33)*** (8.38)*** (1.23) (1.42) (1.36) (1.34) -0.275 -0.273 -0.275 -0.275 -0.510 -0.512 -0.510 -0.511 0.502 0.514 0.513 0.504 (5.24)*** (5.20)*** (5.23)*** (5.24)*** (8.77)*** (8.81)*** (8.77)*** (8.78)*** (3.49)*** (3.57)*** (3.56)*** (3.51)*** -0.030 -0.029 -0.030 -0.029 -0.363 -0.371 -0.365 -0.365 0.629 0.667 0.662 0.635 (0.42) (0.41) (0.42) (0.42) (5.06)*** (5.17)*** (5.09)*** (5.09)*** (3.47)*** (3.67)*** (3.64)*** (3.51)*** Observations 5645 5645 5645 5645 3714 3714 3714 3714 3648 3648 3648 3648 R-squared - - - - - - - - 0.13 0.13 0.13 0.13 40
Page 1 and 2: How Do Corporate Venture Capitalist
Page 3 and 4: 1. Introduction How Do Corporate Ve
Page 5 and 6: documented that IVCs are able to cr
Page 7 and 8: control for firm industry, size, an
Page 9 and 10: Overall, our empirical findings ind
Page 11 and 12: a CVC since they represent financia
Page 13 and 14: Table 1 presents the summary statis
Page 15 and 16: We start with the probit analysis o
Page 17 and 18: could have received CVC financing b
Page 19 and 20: firms’ industry dummies to accoun
Page 21 and 22: experience similar time from first
Page 23 and 24: acking is of higher quality (in oth
Page 25 and 26: investment IPO firms are more likel
Page 27 and 28: Panel B of Table 6a reports the res
Page 29 and 30: IPO market, CVCs are able to attrac
Page 31 and 32: Market price is CRSP stock price an
Page 33 and 34: IVC backing dummy, and the reputati
Page 35 and 36: Our findings can be summarized as f
Page 37 and 38: Lindsey, L., 2004, “The Venture C
Page 39 and 40: Table 2a Patterns of Corporate Vent
Page 41: Table 3 Amount Invested and Pricing
Page 45 and 46: Table 5b Probability of Delisting f
Page 47 and 48: Table 6b Market Participants in CVC
Page 49 and 50: Table 7b Valuation of CVC Backed an

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