The paper investigates major drivers of venture capital (VC) exits which are still in question. In particular, the authors examine the determinants of exit timing in initial public offerings (IPOs). The results from a proprietary dataset of 292 U.S. VC-backed IPOs from 1991 to 2008 imply that VC firm characteristics and fund dynamics have a significant influence on the exit extent and may not always be in line with limited partners’ interests. In particular, first-time funds keep their shares longer after an IPO, whereas funds satisfied with current fund performance cash out soon after the end of the lockup period.
The paper contributes to the current literature on venture capital exits by indicating that general partners' interests influence the exit decision-making and by showing that prospect theory is important in this context.