Venture capital time-to-exit : an empirical study of Norwegian venture capital divestments and holding periods

Abstract

Using a dataset comprising of 505 venture capital deals conducted in Norway between 1993 and 2012, this thesis examines the rate of successfully divesting portfolio companies and the corresponding holding period. By manually combing through every deal and determining entry date, exit date and exit type, we find the duration for a majority of the investments. Exit type is then binomially classified as either success or failure based on the category of exit. The framework of survival analysis is used to estimate the survival functions of the investments and provide unbiased, descriptive statistics on the investments and their time-to-event, categorized as any successful exit. A competing risks analysis examines the effects of a number of covariates in terms of investment sector, fund type and investment stage. The analyses find significant differences between corporate venture capital funds and independent venture capital funds, with the corporate funds showing a tendency to hold their investments for a longer time span and having fewer successful exits. We further find a significantly lower incidence of successful exit among investments done at the seed stage and investments done in companies operating in the cleantech-sector. The results are tested by conducting a logistic regression. When including fixed fund effects, we find the statistical significance to deteriorate in some of the findings, but the general conclusions do not change. The findings have interesting implications for both investors and entrepreneurs in the venture landscape, and could provide a platform from which further research is conducted.