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Can venture capital-backed IPOs compete with seasoned public companies?

This paper investigates whether a small group of venture capital-backed initial public offerings (IPOs) were able to compete effectively with seasoned competitors. Previous studies have shown that IPOs have generally under performed seasoned companies. Using data from the Venture Capital Journal and Compustat , this paper tests for statistically significant differences in the long run market and operating performances of a carefully matched set of IPOs and seasoned companies. Using Wilcoxon paired sample tests as well as standard t-tests, it was found that over the nine years following the IPO, there were no statistically significant differences in market returns, except in the first year when the VCbacked IPOs under performed. On the operating side, it is found that there are no statistically significant differences, except that VC-backed firms have faster sales and asset growth. Our evidence suggests that this set of VC-funded IPOs was able to compete effectively with seasoned competitors. This is interesting and important because the previous research has found that newly public companies, on average, do not compete well against seasoned firms.