VC-backed IPOs outperform market

Listed venture capital-backed companies in Europe beat not only market indices, but outperformed non-VC backed IPOs as well, according to an EVCA-commissioned study.

Companies floated by venture capitalists have outperformed both the greater market and non-VC backed IPOs, according to a new study commissioned by industry trade group European Private Equity and Venture Capital Association.

The study tracked the post-flotation performance of nearly 400 venture-backed companies across five major European stock exchanges, including NYSE Euronext and the London Stock Exchange, from 1996 to mid-2010. From 1996 to H1 2010, there were approximately 2400 IPOs in total in Europe, according to EVCA statistics.

VC-backed listings outshined the indices most during the first few months of trading, according to the study, which research for was conducted by German university Justus-Liebig-University Giessen.  In their first 125 trading days, the VC-backed companies studied were trading 11.7 percent higher than market indices. After 250 days this outperformance figure dropped to 9.6 percent and to 4.2 percent over 500 days.

When comparing VC-backed IPOs with non-VC backed IPOs, private equity’s outperformance became more distinct. After 500 trading days VC-backed companies showed a 16 percent premium, a figure which climbed to 18.3 percent after 750 days of trading.  

“There is a clear and consistent trend that when institutional-grade venture capitalists bring companies to public markets, they perform significantly better than other equivalent companies over a course of years,” said Hendrik Brandis, the chairman of EVCA’s Venture Platform in a statement.