Venture Capital's Exit Decisions

This study examines the impact on exit decisions of venture capitalists. We focus on three major exit choices-IPO, acquisition, and default. In addition, an insight will be given into the influence of dot-com bubble on exit decisions.Based on a sample consisting of 17 European companies that received initial venture capital investment in one of the three year-1999,2001 or 2003, it shows the importance of VC's characteristics and VC-backed company level characteristics to VC's exit decisions. The empirical study suggests that if VC invest in an older and larger sized company, it is more likely to exit through IPO and less likely to default. VCs invested in hi-tech industries are more often associated with acquisition. VCs invested in early stage companies have lower possibility of exit through IPO.The fact that VC-backed company and VC firm are from different country will positively correlated to exit by IPO and acquisition. For VCs investing after the peak of dot-com bubble, they are less likely to exit through IPO and default as well.The innovation of this study is the hand collecting database which contains all VC investments occurred in 1999,2001 and 2003 among 17 European countries. Based on sample, Multinomial Logit method is used to test all the variables. However, due to limited knowledge and ability, the model used in this study does not exhibit a strong explanatory power which needs to be improved in the future study.