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Do venture capital mega-deals provide a quality signal for equity investors in the event of an IPO? Based on a study of hundreds of IPOs, the authors find that mega-deals are linked with superior IPOs and favorable post-IPO performance.


Overview

Venture capital financing rounds with transaction volumes of 100 million US dollars or more have become an integral part of the US venture capital market within the last decade. We aim to determine whether such mega-deals are a quality signal for equity investors in the event of an IPO. Based on a sample of 364 US IPOs, we find that companies that have received a venture capital mega-deal perform, on average, superior IPOs and exhibit favorable post-IPO performance.

About the Authors

Nico Lehnertz

Nico Lehnertz is a research assistant at the Chair of Entrepreneurship and Finance at Heinrich Heine University, Düsseldorf, Germany.

Carolin Plagmann

Carolin Plagmann was a postdoc at the Chair of Entrepreneurship and Finance at Heinrich Heine University Düsseldorf when the paper was written; she now heads the Investor Network at BayStartUP, Munich, Germany.

Eva Lutz

Eva Lutz is a professor of Entrepreneurship and Finance at Heinrich Heine University, Düsseldorf, Germany.