Barry

1994

To list the articles that deal with VC and propose avenues of research.

Many authors explain what VCC do but do not show their added value on the businesses that are financed. The other avenues of research deal with the following questions. Should the businesses continue to find formal VC or would they do better to find other sources of financing? Why are business angels' investments important? Do the latter sacrifice returns or are formal VC investments more cost-effective? What are the ideal forms of divestment and under what conditions should they occur?

Carter & Van Auken

1994

To study the importance of the stage of development (of the business that is financed) for potential investors and its link with the evaluation criteria of the projects.

VCC have a specific preference as to the stage of development of the business that is to be financed. The VCC that invest in the initial stages of development are more concerned with the liquidity of their investment than they are of risk management. They exercise more control on the financed business, are more likely to replace the director of the business and favour divestment more through an IPO.

Lerner (a)

1994

To evaluate the capacity of VCC to plan IPOs when the stock market is rising and of private financing in the contrary situation.

Businesses financed by VC proceed to IPO when the stock market is rising and to private financing otherwise. This confirms the hypothesis. Moreover, experienced VCC seem especially good for introducing a business to the stock market at a time when the markets are at their highest levels.

Bleackley, Hay, Robbie & Wright

1996

To compare the attitudes of entrepreneurs in light of the VCC exit strategy in France and in the United Kingdom.

There is a significant difference between the entrepreneurs of the two countries as to their preference for various possibilities and the underlying reasons therefore.

MacIntosh

1997

Compare VCC exit strategies in Canada to those of the U.S.

There are many differences identified between Canada and the U.S. in terms of VCC exit strategies and the cost-effectiveness of these strategies. These differences can be explained by: the competence of the VCC, the liquidity of the market, taxation, and the type and size of investments.

Cumming & MacIntosh

2000

To compare exit strategies in Canada to those in the U.S.

Partial divestitures in Canada are too related to IPOs, to secondary sales or when the stock market valuation is high compared to the book value of the investment, whereas they are more related to buy outs or to when the amounts involved are high in the U.S. The authors conclude that the differences arise from the legal and institutional environments in the two countries.

Marti & Balboa

2000

To identify the determinants of fundraising in countries where information on return is rare and asymmetrical.

The greater the amounts invested, the easier it is for fund managers to find new funds. Divestment (including IPO and delisting), evaluated to costs, have a negative impact on the acquisition of new funds.

Clendenning & Associates

2001

To present the issues surrounding equity financing of Canadian SME such as venture capital, IPO and post-IPO equity financing to direct Industry Canada's future research in this area.

Analysis shows that questions related to venture capital, the IPO, and post-IPO are important to the development of SME. The structure of the venture capital market in Canada, the behaviour and expertise in venture capital management by Canadian investors, the participation of Canadian institutional investors, the taxation system and the trans-border interaction of the Canadian and American markets are also factors that can compromise the competitiveness of Canadian SME.

Hellmann

2001

To find explanations for the use of convertible securities.

The primary characteristic of convertible securities is to create different rights on monetary flow in terms of IPO and acquisitions. The article explains how convertible securities present an optimal compromise between the need to distribute monetary flows to VCC and the wish to achieve an efficient exit.

Smith

2001

To analyse contractual clauses to see how conflicts on exit strategies can be resolved.

The authors conclude that the parties negotiate their contract so as to leave sufficient freedom to the entrepreneur in the beginning and to increase the threat of exit as time goes by.

Wang & Sim

2001

To Identify the deciding factors in the choice of exit strategies by VCC.

The study reveals that family and high technology businesses prefer IPO as exit strategies. Younger VCC do not proceed to IPO more often than the older ones. In general, results reveal the lack of maturity of the VC market in Asia.

Cumming (b)

2002

To analyse the contracts and exit strategies in the European market.

Financial contracts are very heterogeneous regarding rights on monetary flow and on control. The exit strategy and the revenues made by the VCC depend on these rights and on the characteristics of the businesses.

Cumming & Fleming

2002

To study the impact of laws and of the financial structure on the financing of private companies.

The authors state the importance of legal and institutional factors in the divestment of VCC investments. Co-investment (where several VC funds invest in a business) is the most common form in Australia. The authors have found that co-investment influences the choice of investments (investments in high technology are less probable when the financing is done by co-investment) and the exit strategies (the IPO are less probable and, therefore, "private" and partial exits are more probable when the financing is done by co-investment). When the legal system protects the rights of shareholders more, the VCC finance more high technology businesses and IPO are more frequent.

Cumming & MacIntosh (d)

2002

To see the conditions according to which the VCC do a partial divestment (as opposed to a total one) for all types of exits (IPO, sale on the secondary market, acquisition, buy-back, delisting).

The exit strategy (in whole or in part) depends on the degree of information asymmetry among the "initiated" and outside investors. In the U.S., buy-backs are more often partial whereas, in Canada, they are more frequently whole (due to the very high total amount of American investment). IPO are often associated with a partial exit in Canada (given the Canadian regulatory environment). These differences in exits, between Canada and the U.S., can be caused by a capital market that is less efficient, lower skills of the VCC, etc.

Cumming & MacIntosh (c)

2002

To analyse the relation between exit strategies, the quality of the entrepreneurial team, the nature of the assets and the length of the investment.

Exit strategies used in Canada differ from those in the U.S. and the legal and institutional constraints are responsible for these differences.

Darby & Zucker

2002

To study the decision to proceed to an IPO from the point of view of biotechnological businesses.

The probability of proceeding to an IPO is positively related to the presence of VC and to the number of financing rounds.

Lockett & Wright

2002

To present an overview of the VC market in Asia and in Pacific-rim countries.

The differences are found in the following: the context of the VC investment, selection, evaluation, assistance, value-added and exit strategies.

Schwien-
bacher (a)

2002

To study the choice of different exit strategies (primarily between the IPO and the trade sale of VCC for a project of an innovative product.

The use of an optimum combination between debt and share financing can partially mitigate a manipulation on the part of the entrepreneur so that the IPO is the chosen exit strategy.

Schwien-
bacher (b)

2002

To compare the behaviour of American and European VCC.

The main similarity between the U.S. and Europe is in the intensity of monitoring. The main differences are in: duration before exits (a trade sale is the one most used in Europe), the use of convertible securities, replacing the initial manager and syndication. The primary reasons for these differences are the poor liquidity of European financial markets and the fact that the sale is less risky for young VCC.

Barry

1994

To list the articles that deal with VC and propose avenues of research.

Many authors explain what VCC do but do not show their added value on the businesses that are financed. The other avenues of research deal with the following questions. Should the businesses continue to find formal VC or would they do better to find other sources of financing? Why are business angels' investments important? Do the latter sacrifice returns or are formal VC investments more cost-effective? What are the ideal forms of divestment and under what conditions should they occur?

Lerner (a)

1994

To evaluate the capacity of VCC to plan IPOs when the stock market is rising and of private financing in the contrary situation.

Businesses financed by VC proceed to IPO when the stock market is rising and to private financing otherwise. This confirms the hypothesis. Moreover, experienced VCC seem especially good for introducing a business to the stock market at a time when the markets are at their highest levels.

Gompers

1995

To evaluate the influence of information asymmetries according to the stage of development and the technological level of the investments.

There is an increase in agency costs when there are fewer tangible assets, a possibility of greater growth and the assets become more specialized. The VCC concentrate their investments in high technology companies and in the initial stages of development where information asymmetries are at a maximum. A reduction in the percentage of tangible assets in the industry, a greater ratio market value/book value and greater intensity of R&D activities lead to greater monitoring by the VCC. The VCC periodically collect information and keep the option of stopping the financing if the project has little chance of winding up in an IPO.

Brav & Gompers

1997

To compare the performance of IPO financed by VC to those IPO that are not financed by VC.

Businesses that are financed by VC have a better performance than those that have not been financed by VC when the returns are equally weighted.

Lin & Smith

1997

To study the relationship between the divestment of assets by the VCC during IPO.

The authors find that the reputation of the VCC influence their decision to dispense with their investments: they evaluate the reactions normally associated with transactions of the initiated and the cost of continuing to be involved in the SME.

Espenlaub, Garrett & Mun

1999

To evaluate the potential conflict of interest of IPO of SME that were previously financed by VCC and whose series underwriter is affiliated to the VCC in the United Kingdom.

IPO whose subscribers are affiliated to VCC perform better than others. These IPOs' long-term performance is positively related to the VCC's reputation whereas its short-term stock market performance is more related to the prestige of the underwriter than that of the VCC.

Jeng & Wells

2000

To identify the deciding factors in raising funds.

The deciding factors in raising funds in venture capital are: IPOs, the rigidity in the labour market, disclosure standards of financial reports, private pension funds, growth in the GDP, growth in market capitalization and government programs. IPOs are the most important vectors in venture capital investment.

Kutsuna, Cowling & Westhead

2000

To study the characteristics and the reasons for the performance of businesses that are listed on the JASDAQ.

The authors conclude that the level of involvement of the VCC in the pre-IPO period influence the short-term performance of businesses listed on the JASDAQ (Japan) stock market. Moreover, businesses listed on JASDAQ show differences compared to businesses that are listed on the NASDAQ or on the EASDAQ: they are large and older. Finally, the authors have found that the amount invested by the VCC is negatively related to the stock market value at the time of issuance.

Suarez

2000

To examine the influence of stock markets on the creation of businesses.

The high cost of access to financial markets discourages SME (due to strong information asymmetry), but supervision by a mentor (the influence of VCC) allows postponing listing on the stock exchange to a time when the problems will be less severe. However, given that there is a fixed supply of capital, this forces the VCC to introduce SME rapidly to the stock exchange to recuperate their funds and to redistribute them to new projects. However, there is a beneficial effect on innovation and business creation.

Belden, Keeley & Knapp

2001

To compare the long-term performance, after IPO, of businesses financed by venture capital to those businesses that are already seasoned.

There is no significant difference after the IPO between businesses financed by VC and businesses that are already seasoned, except in the first year when businesses that are financed by VC show lower returns. In terms of operations, there is no difference either except that businesses that have been financed by VC have shown greater growth in sales and assets.

Clendenning & Associates

2001

To present the issues surrounding equity financing of Canadian SME such as venture capital, IPO and post-IPO equity financing to direct Industry Canada's future research in this area.

Analysis shows that questions related to venture capital, the IPO, and post-IPO are important to the development of SME. The structure of the venture capital market in Canada, the behaviour and expertise in venture capital management by Canadian investors, the participation of Canadian institutional investors, the taxation system and the trans-border interaction of the Canadian and American markets are also factors that can compromise the competitiveness of Canadian SME.

Lange, Bygrave, Nishimoto, Roedel & Stock

2001

To study the influence of VCC and of underwriters on the financed business.

Businesses that are financed by the best VCC and introduced on the stock market (IPO) by the best underwriters register a higher return than other businesses. In the period after the IPO, the difference observed in the stock market capitalization of businesses is strictly the result of the quality of the underwriters.

Megginson, Wang & Chua

2001

To study the signal power of traditional and technological factors, and their stability.

The authors conclude that traditional factors (for example, under-evaluation and the reputation of underwriters) have more signal power and are more stable, whereas technological factors, such as R&D personnel, have more long-term effects.

Peng

2001

To construct a venture capital index in the U.S.

The VC industry has known explosive growth between 1987 and 1999 in terms of capital flow, the number of financing rounds and the value of the net asset of the VC index. Returns on VC are high and volatile. One, therefore, sees a certain correlation between the VC index and the NASDAQ stock market index as to returns and volatility.

Rock

2001

To study the phenomenon of companies that do not do IPO in their own domestic markets.

Venture capital can develop especially under conditions that allow VCC to exit by IPO. The author maintains that that can be done elsewhere than in the domestic market.

Wang & Sim

2001

To Identify the deciding factors in the choice of exit strategies by VCC.

The study reveals that family and high technology businesses prefer IPO as exit strategies. Younger VCC do not proceed to IPO more often than the older ones. In general, results reveal the lack of maturity of the VC market in Asia.

Clendenning & Associates

2002

To present the financing profile of Canadian SME (including VC financing).

Canadian SME have access to several sources of VC. Only 2% of the SME that were questioned, however, sought to obtain equity financing in 2001. The total amount in VC investments was still high in 2001, even if there was a decrease compared to the previous year. The highlights of 2001 are: foreign investors played an essential role as they took part in one-third of the total annual VC investment, more than half of the amounts were invested in businesses that were at the initial stages of their growth, businesses in the information technology sector continue to attract a large part of the VC and the number of initial public offerings (IPO) decreased compared to the previous year.

Cumming & Fleming

2002

To study the impact of laws and of the financial structure on the financing of private companies.

The authors state the importance of legal and institutional factors in the divestment of VCC investments. Co-investment (where several VC funds invest in a business) is the most common form in Australia. The authors have found that co-investment influences the choice of investments (investments in high technology are less probable when the financing is done by co-investment) and the exit strategies (the IPO are less probable and, therefore, "private" and partial exits are more probable when the financing is done by co-investment). When the legal system protects the rights of shareholders more, the VCC finance more high technology businesses and IPO are more frequent.

Cumming & MacIntosh (d)

2002

To see the conditions according to which the VCC do a partial divestment (as opposed to a total one) for all types of exits (IPO, sale on the secondary market, acquisition, buy-back, delisting).

The exit strategy (in whole or in part) depends on the degree of information asymmetry among the "initiated" and outside investors. In the U.S., buy-backs are more often partial whereas, in Canada, they are more frequently whole (due to the very high total amount of American investment). IPO are often associated with a partial exit in Canada (given the Canadian regulatory environment). These differences in exits, between Canada and the U.S., can be caused by a capital market that is less efficient, lower skills of the VCC, etc.

Equinox Management Consultants Ltd.

2002

To do a summary of the literature to identify the imperfections, the anomalies and the potential set-backs of the capital market.

There are gaps both in debt financing and in shareholders' equity. In terms of venture capital, the supply seems sufficient. However, funds that are raised by a person are very weak compared to the average of industrialized countries. Moreover, it is difficult to raise capital from public markets (IPO).

Filatotchev

2002

To study the relationship between the executive powers of the business, its strategy in selecting the board of directors and share-ownership in the case of IPO.

The presence of representatives from the VC as outside members on the board of directors does not affect the independence of the business.

Hochberg

2002

To study the influence of VCC on a business' administration after the IPO.

The authors note that there are significant differences between businesses financed by VC and those that are not. Businesses that are financed by VC more frequently use conservative accounting practices, are more efficient after using the poison pill, have more independent members on the boards of directors and more frequently hire independent auditors than other businesses.

Rock

2002

To analyse the links between the VC industry in the U.S., American regulations and the exit strategy by IPO.

The American system facilitates IPO on the NASDAQ for American companies as well as for foreign ones. The case of Israeli companies financed by VC is presented.

Schwien-
bacher (a)

2002

To study the choice of different exit strategies (primarily between the IPO and the trade sale of VCC for a project of an innovative product.

The use of an optimum combination between debt and share financing can partially mitigate a manipulation on the part of the entrepreneur so that the IPO is the chosen exit strategy.

Mull

1994

To determine the reasons that explain why VCC and private SME, which are characterized by a strong growth potential, interact; to determine the nature of the advantages that each group obtains through this association, the profile of the businesses that receive VC financing, and the mechanisms used in the financing process.

Businesses that are financed by VC demonstrate a high level of growth, greater than foreseen and greater than that of businesses that are not financed by VC. A low value of tangible assets, lower profitability and a shorter lifespan are the other significant deciding factors for getting financing. The use of convertible preferred shares is positively related to a growing risk in the business: businesses financed by VC use these securities more than businesses that are not financed by VC.

Jain & Kini

1995

To determine the value-added of VC financing by comparing performance, at the time of the IPO, of businesses that are financed by VC to those that are not financed by VC.

Businesses that are financed by a VCC demonstrate a higher operational performance than that of businesses that are not financed by VC. The market evaluates VCC influences positively as the price at the issuance of businesses financed by VC is greater than that of businesses that are not financed by VC. The quality of monitoring by the VCC is positively related to operational performance after it is listed on the stock exchange.

Murray

1996

To define the conditions for the success of businesses that are financed by VCC.

The main traits that successful businesses have in common have to do with competence, the entrepreneur's exceptional track record and the competitive position of their product in a growing market.

Brav & Gompers

1997

To compare the performance of IPO financed by VC to those IPO that are not financed by VC.

Businesses that are financed by VC have a better performance than those that have not been financed by VC when the returns are equally weighted.

Espenlaub, Garrett & Mun

1999

To evaluate the potential conflict of interest of IPO of SME that were previously financed by VCC and whose series underwriter is affiliated to the VCC in the United Kingdom.

IPO whose subscribers are affiliated to VCC perform better than others. These IPOs' long-term performance is positively related to the VCC's reputation whereas its short-term stock market performance is more related to the prestige of the underwriter than that of the VCC.

Kutsuna, Cowling & Westhead

2000

To study the characteristics and the reasons for the performance of businesses that are listed on the JASDAQ.

The authors conclude that the level of involvement of the VCC in the pre-IPO period influence the short-term performance of businesses listed on the JASDAQ (Japan) stock market. Moreover, businesses listed on JASDAQ show differences compared to businesses that are listed on the NASDAQ or on the EASDAQ: they are large and older. Finally, the authors have found that the amount invested by the VCC is negatively related to the stock market value at the time of issuance.

Barry

2001

To study the causes of value-added of the VCC and the deciding factors in the performance of this type of financing.

The VCC add value to the business that is financed. Moreover, the performance of this type of financing is risky and depends on the variability of returns between the type of investment, the stage of the investment, the amount invested, and the detection of market timing. The diversification of the portfolio can have an influence on these returns.

Belden, Keeley & Knapp

2001

To compare the long-term performance, after IPO, of businesses financed by venture capital to those businesses that are already seasoned.

There is no significant difference after the IPO between businesses financed by VC and businesses that are already seasoned, except in the first year when businesses that are financed by VC show lower returns. In terms of operations, there is no difference either except that businesses that have been financed by VC have shown greater growth in sales and assets.

Lange, Bygrave, Nishimoto, Roedel & Stock

2001

To study the influence of VCC and of underwriters on the financed business.

Businesses that are financed by the best VCC and introduced on the stock market (IPO) by the best underwriters register a higher return than other businesses. In the period after the IPO, the difference observed in the stock market capitalization of businesses is strictly the result of the quality of the underwriters.

Hochberg

2002

To study the influence of VCC on a business' administration after the IPO.

The authors note that there are significant differences between businesses financed by VC and those that are not. Businesses that are financed by VC more frequently use conservative accounting practices, are more efficient after using the poison pill, have more independent members on the boards of directors and more frequently hire independent auditors than other businesses.

Manigart, Baeyens & Van Hyfte

2002

To study the rate of survival of Belgian businesses financed by VC after the divestment of the VCC.

Businesses financed by VC do not show a greater probability of survival than businesses that are not financed by VC. However, businesses financed by the two oldest government organizations that specialize in VC have a greater probability of survival that those financed by the other government programs.