Financial Distress Risk in Initial Public Offerings: How Much Do Venture Capitalists Matter?

On January 7th 2016, Thomson Reuters and the National Venture Capital Association (NVCA) published their Exit Poll Report, which stated that in the U.S. 77 venture capital (VC)-backed initial public offerings (IPOs) raised $9.4 billion in 2015. Over the same period, 93 non-VC-backed U.S. companies went public, raising $23.9 billion (Ernest & Young – IPO Global Trends 2015). For experts in the field of VC investments these numbers cannot appear surprising: the contribution by VCs to the growth of American stock exchanges is a well-documented phenomenon (e.g., Megginson and Weiss, 1991; Lee and Wahal, 2004; Nahata, 2008). … Read more