Investment strategies of Venture Capital funds

: tracking US and UK investment activities

Abstract

The advantages of Corporate Venture Capital (CVC) and Independent Venture Capital (IVC) on successful and profitable exit strategies have increasingly gained interest in VC literature during recent times and literature has found a CVC superiority relative to IVC. This study aims to do an international comparative analysis of the effects of CVC funding on fundraising, duration of investment, and exit strategies across the US and the UK. Through a set of 6562 US and UK formerly VC-backed ventures with first investment date between 1999 and 2014, strong evidence of a positive impact of CVC relative to fully IVC one is found. Results show that CVC-backed ventures receive larger funding amounts and the positive impact of CVC financing on funding is stronger for the UK, when compared to US. US CVC-backed firms host shorter durations before exit, whereas UK CVC-backed start-ups lean towards longer durations than IVC-backed ones. Additionally, CVC-funding decreases duration in US ventures. In addition, funding amount is positively correlated with the likelihood of an IPO exit, yet the impact of duration is ambiguous, in line with the conflicting existing literature. The positive effect of CVC-financing on the probability of an IPO exit is stronger in the UK, when compared to the US. Lastly, results suggest that the English and American VC markets are yet to be perfectly integrated and that theoretical models are more likely to hold in the US, rather than in the UK.

Date of Award	27 Apr 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Fátima Shuwaikh (Supervisor)