Working Paper: CEPR ID: DP4672
Authors: Hedva Ber; Yishay Yafeh
Abstract: This Paper evaluates the ability of venture capital funds to identify and bring to market successful high-tech Israeli companies during the period 1991 to 2000. Using a newly constructed and highly detailed database we find that: (1) The probability of survival until the IPO stage is higher for venture-backed companies. (2) According to several different measures, conditional on making an IPO, the post-listing performance of venture-backed companies is not statistically different from that of non-venture companies throughout the 1990s. We interpret this as evidence that an important contribution of the venture capital industry may be in increasing the survival rates of young technology-intensive firms, rather than in identifying high performers.
Keywords: IPO; long-run performance; survival rate; venture capital
JEL Codes: G20; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher probability of survival until IPO stage (D25) | Reducing mortality rates among startups (M13) |
| VC backing (G24) | Higher probability of survival until IPO stage (D25) |
| VC backing (G24) | Post-IPO performance (G24) |