VCs as Intermediaries in IPO and Trade Sale Exits: Evidence from Industry-Level Analysis in Europe and the U.S.

We examine the role of the VC as an intermediary between the portfolio firm and the new investors in the exit phase. To improve the understanding of VC’s role as a certifying agent, we model exit outcomes on an industry level. We do so, to analyze the VC’s role for the different exit conditions in the different industries. We find that the need for certification by the VC is conditional on the exit conditions within an industry and that certification by the VC is more important to exit to an IPO in industries with high IPO rates. The result indicates that VCs need to signal their ability as strong intermediaries to successfully exit their portfolio firms to an IPO if IPO investors face severe search and screening costs.