Determinants of venture capitalists' exit strategies: An empirical study through survival analysis

Abstract

In this dissertation I study the determinants of venture capitalists’ exit strategies, and more specifically, the interactions between exit type and timing. Indeed, in addition to knowing how they plan to exit, venture capitalists are also interested in knowing when they will be able to do so. Examining the exit strategies of venture capitalists thus requires to take those two dimensions into account. Through the use of survival analysis methods, I analyze a sample constituted of more than 19.000 financing rounds in 11.500 unique firms. Set in the framework of competing risks models, this rigorous statistical analysis gives some interesting insight on the relationships between a series of variables (such as the stage at which the round takes place, the syndication of the deal, the industry of the firm, and so on) and the time needed for an exit to occur. Moreover, when considering the type of investor I make the distinction between business angels and venture capitalists. This is therefore the first time that the impact of business angels on the exit strategies of venture capitalists is studied using survival analysis methods. The results show that the presence of business angels allows firms to exit through acquisition both faster and more often. However, business angels do not seem to have a meaningful impact on the likelihood of liquidation. Furthermore, it can also be concluded from the analysis of the results that the benefits from deal syndication are real. Indeed, when at least two venture capitalists are present, investments appear to exit through acquisition substantially more often and up to 26% faster. Liquidations are also significantly less likely to occur when the number of venture capitalists involved increases.