Market Cap Of Venture Backed Ipo

Market cap of venture backed ipo

Patents, Innovation, and Performance of Venture Capital-backed IPOs

55 PagesPosted: 8 Dec 2013Last revised: 17 Jan 2015

Date Written: January 15, 2015

Abstract

We study the predictive power of patents on the long-run performance of venture capital (VC)-backed initial public offerings (IPOs).

Market cap of venture backed ipo

We show that VC-backed IPOs that have at least one patent at the time of the IPO substantially outperform other VC-backed IPOs, with 3-year buy-and-hold market-adjusted returns of -7.1% vs.

-23.3%.

2. Spotify [NYSE: SPOT]

On average, VC-backed IPOs without patents perform similarly to non-VC-backed IPOs. We also report that VC-backed IPOs from 1981-1998 outperformed other IPOs, but the pattern has reversed for IPOs from 1999-2006.

IPO Valuation Model

Although a smaller proportion of non-VC-backed IPOs possess patents, those with patents also outperform those without patents.

Keywords: Initial public offerings, Venture capital, Patents, Innovation, Long-run performance

JEL Classification: G14, G24, G30

Suggested Citation:Suggested Citation

Cao, Jerry and Jiang, Fuwei and Ritter, Jay R., Patents, Innovation, and Performance of Venture Capital-backed IPOs (January 15, 2015).

Available at SSRN: https://ssrn.com/abstract=2364668 or http://dx.doi.org/10.2139/ssrn.2364668

Market cap of venture backed ipo