Are VC-backed IPOs delayed trade sales?

- More VC‐backed firms are taken over while being on the exchange as compared to non‐VC‐backed firms.
- We carve out a statistically significant causal effect of VC‐backing on the takeover probability.
- This is due to changes in the VC‐backed firms' corporate governance and in their cost‐benefit trade‐off of being public.
- We find clear evidence that the certification role of VCs allow them to take firms with a higher takeover likelihood public.
- Non‐VC‐backed firms that went public in hot‐issue markets are more often taken over, this is not true for VC‐backed firms.

We investigate the role of venture-backing at the time of the initial public offering for the decision to subsequently be taken over and leave the exchange. We show, controlling for firm characteristics as well as the endogeneity of the involvement of VC, that VC-backed firms are significantly more likely to leave the exchange in the course of a take over. Our analysis sheds new light on decisions to go private, and even more so on the process of going public for VC-backed firms. Our findings suggest that, in a significant number of cases, VC-backed IPOs can be interpreted as delayed trade sales.