On the Life Cycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms

We use data over 25 years to understand the life cycle dynamics of VC- and non-VC-financed firms. We find successful and failed VC-financed firms achieve larger scale but are not more profitable at exit than matched non-VC-financed firms. Cumulative failure rates of VC-financed firms are lower, with the difference driven largely by lower failure rates in the initial years after receiving VC. Our results are not driven by VCs disguising failures as acquisitions or by certain types of VCs. The performance difference between VC- and non-VC-financed firms narrows in the post-internet bubble years, but does not disappear.