6-7-2008 venture capital firm experience and company growth

Academics argue that growth studies should be longi tudinal, because organizational growth is inherently a dynamic measure of change over time. T h goal of this paper is (a) to gain an insight into the temporal pattern of growth within venture capital backed companies and (b) to study the impact of differences in venture capital firm (VCF) experience on this growth pattern. For this purpose, a unique longitudinal database is used, re lated to a sample of 100 venture capital backed companies that are followed from the year of VCF pa rticipation up to five years after VCF participation. It is shown how Linear Mixed Models (LMMs) can be used to examine dynamic issues in growth studies. Contrary to prior studies ( mplicitly) assuming a constant growth rate across time, which is in line with Gibrat’s law, I present evidence of non-linearities in growth trajectories. Results further indicate that venture s backed by VCFs with high overall or industry deal experience grow significantly faster in terms of total assets compared to ventures backed by VCFs with low overall or industry deal experience.