Contextual study of VC and PE investments: the case of Norway

Abstract

This thesis provides is contextual study of private investing activity in Norway. It addresses both theoretical aspects as well as practical implications of the VC and PE influence on the economics of the investee firm. The aim of this analysis is to understand how the presence of VC and PE investments in a firm affects it’s performance and growth. In the theoretical part we discuss the structure and dynamics of the venture capital cycle, specify the value adding activities provided by investors and make an overview of Norwegian VC and PE market specifics. In the empirical analysis we focus on value creation activities. We address the key drivers of the investment activity and disclose the firm specific characteristics, that investors are looking for in the potential investee companies. Using CSI database, which contains observation on investee firms from 1992 to 2013, we analyze the value creation effects of the investments on Seed/Venture as well as Buyout stages using the following variables: sales revenues, payroll expenses, equity ratio, patents, R&D. The results suggest that in the majority of the cases, VC and PE investing has a positive impact on value creation in the investee firms both on Seed/Venture and Buyout stages. We confirmed the fact that company’s post investment performance, regardless the stage of investing is generally better than pre investment, meaning that the VC and PE investing is an efficient mechanism that enhances company’s growth and performance.