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On the Life Cycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms




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    • Manju Puri is at Duke University and the NBER and Rebecca Zarutskie is at Duke University. We thank Steve Kaplan (Acting Editor), two anonymous referees, seminar participants at Columbia University, Duke University, Harvard Business School, London Business School, Massachusetts Institute of Technology, National Institute of Public Finance and Policy in New Delhi, the New York Fed, the University of Illinois at Urbana-Champaign, the U.S. Census Bureau Center for Economic Studies, and participants and discussants at the Western Finance Association 2007 meeting, the European Finance Association 2007 meeting, the 2007 Corporate Finance Conference at Washington University in Saint Louis, and the Financial Intermediation Research Society 2008 conference for valuable comments and suggestions. We thank Kirk White and Bert Grider for their diligent assistance with the data and for helpful comments. David Braun, John Chang, Jeffrey Ding, Yangyang Guo, Steven He, Dianna Hu, Greg Johnston, Ethen Kang, Lexxe Keister, Anurag Kondapalli, Young See Kwon, Fiona Lee, Kathryn Li, Fei Long, Kevin Plattenburg, Peichun Wang, Pengpeng Wang, Monica Wood, Caroline Xie, Jie Yang, Shouyue Yu, Gang Zhang, Lucy Zheng, Yiwen Zhu, and Jeff Zuo provided excellent research assistance. The research in this paper was conducted while the authors were Special Sworn researchers of the U.S. Census Bureau at the Triangle Census Research Data Center. Research results and conclusions expressed are those of the authors and do not necessarily reflect the views of the U.S. Census Bureau. This paper has been screened to ensure that no confidential data are revealed.


We use data over 25 years to understand the life cycle dynamics of  VC- and non-VC-financed firms. We find successful and failed VC-financed firms achieve larger scale but are not more profitable at exit than matched non-VC-financed firms. Cumulative failure rates of  VC-financed firms are lower, with the difference driven largely by lower failure rates in the initial years after receiving VC. Our results are not driven by VCs disguising failures as acquisitions or by certain types of  VCs. The performance difference between VC- and non-VC-financed firms narrows in the post-internet bubble years, but does not disappear.

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