ESSAYS IN VENTURE CAPITAL: INSTITUTIONAL INVESTOR BEHAVIOR AND IPO PERFORMANCE

Abstract

This collection of essays investigates the nature of venture capital as an asset and as a financer of industry. Chapter 1 presents an overview of venture capital, starting with its history and development. It examines the nature of venture capital and its ability to generate returns for its investors with emphasis on data sources available. Using a simple model, this chapter predicts that the inclusion of venture capital will improve the mean-variance frontier of an investor's portfolio. Chapter 2 takes a closer look at these investors in venture capital, known as limited partners. Here I investigate the behavior of the limited partners with respect to their private equity investments. This chapter models the rationale for the common practice of syndication of the investment partnership interests. While Chapter 2 focuses on the "parents" of venture capital, Chapter 3 observes the performance and survivability of some of venture capital's offspring--initial public offerings of the companies financed by venture capitalists. A major finding of this analysis is that venture capital firms which specialize by industry produce initial public offerings which tend to survive longer, perform better, and are less likely to delist. Chapter 3 also introduces a new dataset to the field of private equity research.