GRANDSTANDING IN THE VENTURE CAPITAL INDUSTRY

I develop and test the hypothesis that young venture capital firms tak e companies pubic earlier than older venture capital firms in order to establish a reputation and successfully raise capital for new funds. Evidence from a sample of 433 IPOs suggests that companies backed by y oung venture capital firms are younger and more underpriced at their I PO than those of established venture capital firms. Moreover, young ve nture capital firms have been on the board of directors a shorter peri od of time at the IPO, hold smaller equity stakes, and time the IPO to precede or coincide with raising money for follow-on funds.