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

Venture Capitalists' Decision to Withdraw: The Role of Portfolio Configuration From a Real Options Lens

This is the author's final draft. The publisher's official version is available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2036399.When does a venture capital firm withdraw from an investment project prior to its completion? This study offers a real options view on this decision by examining the contingent effects of portfolio configuration. We explore how project withdrawal can be influenced by two distinct dimensions of portfolio configuration, portfolio focus in a strategic domain and portfolio diversity across multiple domains. The empirical analysis shows that while portfolio focus weakens the negative effect of industry-level uncertainty on a venture capitalist’s propensity to withdraw from a project, portfolio diversity strengthens the effect of uncertainty. This study informs current research on the boundary of real options theory and sheds light on the behavior of venture capitalists in financing entrepreneurship

Expert consensus statement on the science of HIV in the context of criminal law.

CAPRISA, 2018.Abstract available in pdf