The Impact of Venture Capital Holding on the Firms Life-cycle: Evidence from IPO Firms

Venture capital firms often continue to stay as shareholders and on the board of directors of their investee companies even after they have gone public. This paper examines the impact of venture capital ownership beyond the IPO listing on important consequential, corporate decisions in a firm's lifetime, including time to dividend initiation. Using a sample of 1,409 US firms listed between 2000 and 2017, we find that venture capital firms delay the time to initiate dividends by approximately two years. The presence of venture capital firms further delays the use of external growth strategies (through acquisitions) and postpones the introduction to the corporate bond market while relying more quickly on seasoned equity offerings. Several robustness checks are performed, including controlling for possible reverse causality. These results are consistent with the view that venture capital firms extend the growth phase of the firms' life-cycle prior to becoming a mature firm. We further show that the presence of VC funds in the firm at time of these decisions leads to positive stock price reactions, suggesting they offer a certification effect for continued growth opportunities.