Can VCs Time the Market? An Analysis of Exit Choice for Venture-Backed Firms

We use a sample of 8163 venture-backed companies over three decades to test the competing hypotheses that levels and relative shares of IPO and Mamp;A exits are affected by market timing, versus pseudo market timing that reflects market conditions. We find evidence of pseudo market timing. VC-backed issuers react to market or sector run-ups but do not predict downturns. We find no evidence that firm-specific market timing contributes to IPO or Mamp;A waves. We also find that acquirers turn to acquisition when other opportunities are unattractive, and that the market may be slow to recognize that such opportunities are declining