A1816
Title: Venture capital exit: A dynamic duration approach
Authors: Yuet-yee Wong - Binghamton U (United States) [presenting]
Abstract: The role of dynamic unobserved risk effects is studied in venture capital exit where stage funding is cast in a standard multivariate hazard model. The model choice is the result of data patterns that emerged from a panel of nascent entrepreneurs constructed using SDC Platinum-VentureXpert (1990-2000). Estimating the model with maximum likelihood, the results indicate strong evidence for the presence of unobserved effects. A significant correlation of these unobserved effects is found across funding rounds, with capitalist effects being more persistent. Relative to the capitalist effect, project-effect is more important in explaining the systematic variation in the funding horizon and chance of success. The two unobserved effects explain 2/3 of the overall variation in the funding horizon. The results are robust to distributional assumptions. Conventional estimates that assume venture capital exits are driven by static exposure or by observable factors alone are upward biased.
