Do Corporate Venture Capitalists Add Value to Start-Up Firms? Evidence from IPOs and Acquisitions of VC-Backed Companies

Authors


  • We thank an anonymous referee, Chris Anderson, Cliff Ball, Paul Chaney, Amar Gande, Craig Lewis, Ron Masulis, Vassil Mihov, Antoinette Schoar, Hans Stoll, and seminar participants at the Corporate Entrepreneurship Conference at the Harvard Business School, the Goethe University in Frankfurt, the University of Kansas, Vanderbilt University, the FMA Annual Meetings, and European Meetings for their helpful comments. The Securities Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement of any of its employees. The views expressed herein are those of the author and do not necessarily reflect the view of the Commission or of the author's colleagues upon the staff of the Commission.

Abstract

We present evidence that corporate venture capitalists (CVCs) add value to start-up companies only when the start-ups have a strategic fit with the parent corporations of CVCs. We find that CVCs provide a variety of services and support that suit the specific needs of start-ups operating in different industries. CVC-backed start-ups are able to obtain higher valuations at the IPO than non-CVC-backed ones, and the value added by CVCs concentrates in start-ups with a strategic overlap with CVC parents. Entrepreneurial companies with strategic CVC backing also receive higher takeover premiums when they become acquisition targets.

Ancillary