Venture capital value creation: IPO performance of VC-backed companies in CEE

• Název práce v češtině: Tvorba hodnoty rizikového kapitálu: IPO výkon společností podporovaných VC v CEE
• Název v anglickém jazyce: Venture capital value creation: IPO performance of VC-backed companies in CEE
• Klíčová slova anglicky: venture capital, start-ups, investment funds, performance, initial public offering
• Akademický rok vypsání: 2019/2020
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: Mgr. Petr Polák, M.Sc., Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 30.07.2020
• Datum zadání: 30.07.2020
• Datum a čas obhajoby: 09.06.2021 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26
• Datum odevzdání elektronické podoby: 04.05.2021
• Datum proběhlé obhajoby: 09.06.2021
• Oponenti: Mgr. Emma Haas

Seznam odborné literatury

The effect of introduction of Cloud Computing: The case of Venture Capital (Bc. Jan Šomvársky)

Private Equity Fund Performance The Comparison of Venture Capital Funds and Buyout Funds in Europe and the Determinants of their Returns (Bc. Richard Ballek)

Performance of Private Equity Backed IPOs: Evidence from European Market (Bc. Jakub Říha)Levis, Mario. (2011). The Performance of Private Equity-Backed IPOs. Financial Management. 40. 253-277. 10.2307/41237903.

Aggarwal, Rajesh & Bhagat, Sanjai & Rangan, Srinivasan. (2009). The Impact of Fundamentals on IPO Valuation. Financial Management. 38. 253 - 284. 10.1111/j.1755-053X.2009.01035.x.

Krishnan, Cnv & Ivanov, Vladimir & Masulis, Ronald & Singh, Ajai. (2009). Venture Capital Reputation, Post-IPO Performance, and Corporate Governance. Journal of Financial and Quantitative Analysis. 46. 1295-1333. 10.1017/S0022109011000251.

Bessler, Wolfgang & Seim, Martin. (2012). The performance of venture-backed IPOs in Europe. Venture Capital: An International Journal of Entrepreneurial Finance. 14. 1-25. 10.1080/13691066.2012.702447.

Zaremba, Adam & Szyszka, Adam. (2014). Is the Abnormal Post-IPO Underperformance Really Abnormal? The Evidence from CEE Emerging Markets. SSRN Electronic Journal. 10.2139/ssrn.2487926.

Arcuri, maria cristina & Gandolfi, Gino & Regalli, Massimo & Soana, Maria-Gaia. (2018). Underpricing and long-term performance of IPOs: Evidence from European intermediary-oriented markets. Economics, Management, and Financial Markets. 13. 11-36. 10.22381/EMFM13320181.

Sołoma, Andrzej. (2015). IPO in Private Equity Finance: Evidence from Poland. Procedia - Social and Behavioral Sciences. 213. 358-363. 10.1016/j.sbspro.2015.11.551.

Berk, Ales & Peterle, Polona. (2015). Initial and Long-Run IPO Returns in Central and Eastern Europe. Emerging Markets Finance and Trade. 51. S42-S60. 10.1080/1540496X.2015.1080555.

Raghupathy, M.B & Annamalai, Thillai. (2015). Financial value creation: A comparative study of VC-backed IPOs and non-VC-backed IPOs in India. The Journal of Private Equity. 18. 55-71. 10.3905/jpe.2015.18.3.055.

Guo, Di & Jiang, Kun. (2013). Venture Capital Investment and the Post-IPO Performance of Entrepreneurial Firms: Evidence from the People's Republic of China. Journal of Corporate Finance. 22. 375-395. 10.1016/j.jcorpfin.2013.07.001.

Maximilian, Jung & Gupta, Jyoti. (2018). Market Performance of Sponsor-Backed Initial Public Offerings: An Empirical Analysis of the German Market. Journal of Economics and Public Finance. 4. 31. 10.22158/jepf.v4n1p31.

Miloud, Tarek & Aspelund, Arild & Cabrol, Mathieu. (2012). Startup valuation by venture capitalists: An empirical study. Venture Capital: An International Journal of Entrepreneurial Finance. 14. 1-24. 10.1080/13691066.2012.667907.

Manigart, Sophie & Waele, Koen & Robbie, Ken & Desbrières, Philippe & Sapienza, Harry & Beekman, Amy. (2000). Venture Capitalists, Investment Appraisal and Accounting Information: A Comparative Study of the US, UK, France, Belgium and Holland. European Financial Management. 6. 389 - 403. 10.1111/1468-036X.00130.

Manigart, Sophie & Sapienza, Harry & Vermeir, Wim. (1996). Venture Capital Governance and Value Added in Four Countries. Journal of Business Venturing. 11. 439-469. 10.1016/S0883-9026(96)00052-3.

Hege, Ulrich & Palomino, Frederic & Schwienbacher, Armin. (2011). Determinants of Venture Capital Performance: Europe and the United States.

Prasetyo, Ahmad Danu & Imran, Muhammad & Rizka, Fania & Fachira, Ira. (2018). Determinants of venture capital performance in Indonesia. New Trends and Issues Proceedings on Humanities and Social Sciences. 5. 29-36. 10.18844/prosoc.v5i2.3652.

Hadley, Beth. (2017). Analyzing venture capitol influence on startup success : a people-centric network theory approach.

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Předběžná náplň práce v anglickém jazyce

Research question and motivation

How does venture capital add value to the start-ups they invest in? How do venture backed companies perform compared to their non sponsored peers? How do the start-ups perform post IPO? Does it apply to CEE markets as well? Are CEE markets any different?

Hypothesis: VC-backed company IPOs underperform the general market, while overperforming non-VC backed peers (Maxmilian & Gupta 2018)

Every start-up company is faced with a question what capital they should accept when starting out. The aim of the thesis is to help those companies seeking external equity capital understand the consequences of their decisions. Performance of these companies is going to be monitored at the IPO and afterwards. The thesis will try to answer whether venture capital brings any value to the invested company and compare that to other forms of funding.

Previous research suggests that IPOs generally underperforms in the long run. On the other hand, venture backed companies outperform their peers post IPO thanks to value added with the investment. The thesis will look closer to the CEE markets and try to answer, whether the same holds true in these markets.

We expect to see the same results in the CEE market as there is no expectation of different results. The thesis aims to support claims made in other regions to hold true for the different environment in CEE as well.

Contribution

The thesis will complement the overall findings on venture capital value creation with a specific focus on CEE companies. The success stories will be analysed and will help the local ecosystem deliver value to the economy. It will also help start- up founders make a more qualified decision when facing an external investor. All of the above will be specific to the CEE markets and compare them to more developed countries with regards to venture capital.

Methodology

Start-ups exited through IPO will be analysed and their stock performance will be compared. Data for the stock performance will be taken from the stock exchanges these companies have been listed at. Venture Capital financing rounds and valuations will be taken from pitchbook.com and dealroom.co
Multivariate Regression model will be used for the performance comparison on the panel data collected on the stock exchanges. The results will be presented alongside the key performance indicators.

Outline

1. Venture Capital introduction

a. Funds
b. Start-ups
c. Value creation
d. Life cycle
e. Exit strategies

2. CEE markets landscape

a. Investors
b. Start-ups
c. Government
d. Selected success stories

3. Literature review

a. Underperformance of IPOs
b. Overperformance of VC backed start-ups
c. Theories of value added by PE investor

4. Methodology

a. Selected companies
b. Data description
c. IPO performance

5. Performance comparison

6. Regression results

7. Conclusions