Venture Capital Exit Strategy with IPO or Strategic Investor Buyout

This paper analyzes factors that influence the exit strategy for venture capital investors. The author focuses on the issue of the selection method of exiting the investment, what to do with each individual portfolio company, to what event you need to strive for an IPO or sale to a strategic investor. Based on data from Thomson Reuters a global sample of companies has been formed (4,5k observations), which came to an IPO or have been sold to a strategic investor in the period from 2003 to 2015. Next, Probit method was used to estimate the probability of IPO choices. The results confirm initial set of hypothesis: obtaining first investment at a very early stage of seed, as well as belonging to the software industry reduces the attractiveness of the exit through IPO. At the same time, the syndication of investors and the total investment has a positive effect on the IPO opportunities. Regional differences have a significant impact in the United States relatively more attractive the possibility of selling to a strategic investor, than in other regions. The resulting model predict outcomes with high accuracy. There was 83.9% (520 of 620) correctly predicted IPO outcomes and 88.7% (3560 of 4016) outcomes of strategic investor sale. The novelty of this paper consists of more qualitative data, a global large sample, taking into account regional differences, the use of new variables that yielded statistically significant results and confirm the idea of ​​previous researchers. Also of note, the prediction accuracy of the received model.