Value Creation of Portfolio Companies by Venture Capital Funds on the Polish Market

Abstract

Data on VC and PE efficiency shows that the overall efficiency of VCbacked firms is higher than that of non-VC-backed firms at every point in time. This efficiency advantage of VC-backed firms arises from both screening and monitoring. The efficiency of VC-backed firms prior to receiving financing is higher than that of non-VCbacked firms, and further, the growth in efficiency subsequent to VC financing is greater for such firms. The above increases in efficiency of VC-backed firms are spread over the first two rounds of VC financing after which the TFP of such firms remains constant until exit. Overall efficiency gains generated by VC backing arise primarily from improvements in sales, the efficiency gains of high-reputation VC-backed firms arise also from lower increases in production costs. Finally, we show that VC backing and the associated efficiency gains positively affect the probability of a successful exit.