Ivanov Xie (2010) - Do Corporate Venture Capitalists Add Value To Start Up Firms

This page is referenced under:

• VC Acquisitions Paper
• VC Acquisitions Lit Review

Reference

Ivanov, V.I. and Xie, F. (2010), "Do Corporate Venture Capitalists Add Value to Start-Up Firms? Evidence from IPOs and Acquisitions of VC-Backed Companies", Financial Management, Vol. 39, No. 1, pp.129-152 (pdf)

@article{ivanov2010corporate,
  title={Do Corporate Venture Capitalists Add Value to Start-Up Firms? Evidence from IPOs and Acquisitions of VC-Backed Companies},
  author={Ivanov, V.I. and Xie, F.},
  journal={Financial Management},
  volume={39},
  number={1},
  pages={129--152},
  year={2010},
  publisher={Wiley Online Library},
  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.},
  filename={Ivanov Xie (2010) - Do Corporate Venture Capitalists Add Value To Start Up Firms.pdf}
}

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.