Venture Capital Exits and Investments: The Influences of Market Run-up, Market Timing, and Media Attention

In this paper, we address the question of whether venture capital (VC) firms are able to add value through exit and investment timing. Considering all venture-backed exits, we find that VCs are able to time the initial public offerings (IPOs) to occur after market run-ups. However, we find no evidence that VCs can time IPOs to precede low or negative market returns. Focusing on the biotech sector, we do find evidence of successful market timing in that IPO activity is highest following market run-ups and before periods of low market returns. Controlling for leading and lagging market returns, we find little evidence that media attention influences IPO exit timing. As to new VC investments in biotech, we find that when market returns are low (high), VCs focus their investments in the sector on earlier (later) investment rounds with longer (shorter) times to anticipated harvesting.