U.S. public and private venture capital markets, 1998-2001: A fundamental information analysis

Systematic analysis of U.S. capital markets reveals important empirical facts that analytical modeling or empirical research seeking to explain the 1998-2001 movements needs to recognize. There is no single "bubble point" at which U.S. capital markets had an epiphany that valuations required a sharp downward re-evaluation. Rather, different sectors had different points after which ex post sustained declines occurred. For the NASDAQ/NYSE/AMEX public capital markets, the sustained ex post declines occurred starting in March 2000 for the computer software industry and in September 2000 for the computer hardware industry. Private venture capital investment in new ventures peaked in the March 2000 quarter for software and in the September 2000 quarter for hardware and communications. Four sectors exhibiting extreme price movements are identified - computer hardware, computer software, telecommunications, and biotech/pharmaceuticals. These sectors had observable characteristics prior to 1998 that implied higher risk - they had higher relative risk (CAPM beta), higher standard deviation of security returns, more extreme revenue growth increases (decreases) in the upper (lower) tails, and a higher propensity for negative net income. During the 1998-2001 period, companies in these sectors had abnormally high revenue growth rates. An Internet sample of companies exhibits even higher abnormal revenue growth rates relative to either prior periods or other companies in the 1998-2001 period. The large relative increases and decreases in the market capitalization of U.S. capital markets in 1998-2001 may well have more grounding in risk-reward asset pricing theory than many commentators have recognized.capital markets; stock prices; Internet stocks; stock market bubble;

Choosing Between Promising and Crowded Industries: How Does the Venture Capital Industry Fare in Each?

Incredible profits from Initial Public Offerings have been highly emphasized. This paper refutes these profits as being standard and supports the market’s return to normalcy by stratifying annual and cumulative returns for different industries: Biotechnology; Communications; Computer Related companies; Medical, Health and Life Science industries; Non-High-Technology companies; and Semiconductor and Other Electronics Industries. This paper tests whether an entrepreneur has greater potential for success in continually promising fields or whether one should slug it out in a risky but potentially very rewarding industry. A comparison of success is made between already competitive businesses and those, which are young and growing.Initial public offering, venture capital, annualized and cumulative rates of return, Information Technology, Medical, Health and Life Science, Non-High Technology, Biotechnology, Communications, Computer Industry, Semiconductor and Other Electronics Industries

Venture capital industry development in the Hong Kong and Pearl River Delta Region

Thesis (M.C.P.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 2000.Includes bibliographical references (leaves 62-64).Venture capital has been the initial source of capital for some of the most visible new firms in the United States for the past decades. The well-known multinational high-tech companies such as Intel, Apple Computer, and Microsoft, were all backed by venture capital funds at their inception. Thus, it is well recognized that venture capitalists play a crucial role in supporting many new high-tech firms to grow into successful, if not multinational, companies. Nowadays, other countries in Europe and Asia are also attempting to establish high technology industries of their own for the sake of restructuring their economic systems. As a result, venture capital has naturally become an issue of concern. In this thesis, I will use the Hong Kong and Pearl River Delta Region as a case study. I generalize the factors that are influencing venture-capital development and review the current development of venture-capital activities. I also investigate the investment profile, investment style, competition, and other important elements, of venture-capital firms in the region, especially in Hong Kong. This research was conducted through review of current literature and personal interviews with practitioners in the Hong Kong high-technology industry and venture capital industry development. The goal of this thesis is to draw a conclusion on the potential of the development of the venture-capital industry in the subject region.by Tak-Chuen Edwin Cheung.M.C.P

Has Europe been catching up? : An industry level analysis of venture capital success over 1985 – 2009 : [Version November 2012]

After nearly two decades of US leadership during the 1980s and 1990s, are Europe’s venture capital (VC) markets in the 2000s finally catching up regarding the provision of financing and successful exits, or is the performance gap as wide as ever? Are we amid an overall VC performance slump with no encouraging news? We attempt to answer these questions by tracking over 40,000 VC-backed firms stemming from six industries in 13 European countries and the US between 1985 and 2009; determining the type of exit – if any – each particular firm’s investors choose for the venture

Matching Startup Founders to Investors: a Tool and a Study

The process of matching startup founders with venture capital investors is a necessary first step for many modern technology companies, yet there have been few attempts to study the characteristics of the two parties and their interactions. Surprisingly little has been shown quantitatively about the process, and many of the common assumptions are based on anecdotal evidence. In this thesis, we aim to learn more about the matching component of the startup fundraising process. We begin with a tool (VCWiz), created from the current set of best-practices to help inexperienced founders navigate the founder-investor matching process. The goal of this tool is to increase efficiency and equitability, while collecting data to inform further studies. We use this data, combined with public data on venture investments in the USA, to draw conclusions about the characteristics of venture financing rounds. Finally, we explore the communication data contributed to the tool by founders who are actively fundraising, and use it to learn which social attributes are most beneficial for individuals to possess when soliciting investments.Comment: MIT Master's of Engineering in Computer Science thesis. June 2018. 152 page

Innovation and venture capital exit performance

Venture capital is a potent source of R&D financing which contributes significantly to technological innovation output in the form of patented inventions. Scholars have argued that tighter protection of intellectual property rights reduces expropriation risks and encourages venture capitalists to invest in technology firms. Prior studies have showed that early stage technology investors give much weight to investment selection criteria related to innovation e.g. protection of intellectual property, platform and uniqueness. However, VC investors generally receive little on their investments until a liquidation event occurs – IPO and M&A (trade sale) exits define venture capital performance. A review of the literature indicates that few empirical studies have examined the influence of patented innovation on the exit performance of VC-backed technology firms. This paper seeks to address this specific knowledge gap in venture capital research and practice. It builds on resource-based view (RBV) theory which argues that technological innovation is an important strategic resource of the entrepreneurial firm that can attract VC investment, provide competitive advantage and produce superior performance. This study is based on matched data compiled from VentureXpertTM, DelphionTM and NBER/USPTO databases. The resulting unique and proprietary dataset consists of 1504 U.S. VC-backed exits across 7 technology sectors in the 20 years from 1980-2000, 961 IPOs and 543 M&As. The influence of technological innovation on the exit performance of VC-backed technology firms is examined. As predicted by RBV theory, technology firms engaged in patenting activity were found more likely to be associated with the more profitable IPO exit route, higher VC investment and exit value

Minorities and Venture Capital: A New Wave in American Business

Based on a survey and analysis of minority-oriented venture capital funds, assesses minority-owned businesses' access to venture capital, rates of return, the investment mix among industries, sources of funds, and outlook for minority-oriented investment

Venture Capital Funds Investing in Minority-Owned Businesses: Evaluating Performance and Strategy

Based on a survey of minority-oriented private equity funds, analyzes their performance between 2000 and 2006 compared to those of major stock indices. Looks at trends among minority-oriented funds and their investment strategies in economic downturns

Cities Online: Urban Development and the Internet

Examines how institutions in Austin, Texas; Cleveland, Ohio; Nashville, Tennessee; Portland, Oregon, and Washington, D.C., are adapting to the Internet as an economic development and community building tool

Are particular industries more likely to succeed? : A comparative analysis of VC investment in the U.S. and Europe

The objective of this study is to determine whether specific industries across countries or within countries are more likely to reach a stage of profitability and make a successful exit. In particular, we assess whether firms in certain industries are more prone to exit via IPO, be acquired, or exit through a leveraged buy-out. We are also interested in analyzing whether substantial differences across industries and countries arise when looking separately at the success’ rate of firms which have received venture funding at the early seed and start-up stages, vis-à-vis firms that received funding at later stages. Our results suggest that, inasmuch as some of the differences in performance can be explained by country-specific factors, there are also important idiosyncratic differences across industries: In particular, firms in the biotech and the medical / health / life science sectors tend to be significantly more likely to have a successful exit via IPO, while firms in the computer industry and communications and media are more prone to exit via merger or acquisition. Key differences across industries also emerge when considering infant versus mature firms, and their preferred exit. JEL Classification: G24, G3 Keywords