Venture Capitalists and Cooperative Start-up Commercialization Strategy

This paper examines the possible impact of venture capital (VC) backing on the commercialization direction of technology-based start-ups by asking: To what extent (if at all) do VC-funded start-ups engage in cooperative commercialization strategies (strategic alliances or technology licensing, or both) relative to a comparable set of start-ups, and with what consequences? To address these questions, I assemble a novel data set that matches firms receiving a federal research and development subsidy through the U.S. Small Business Innovative Research program to VC-funded firms by observable characteristics in five technology-intensive industries. These data allow decoupling of cooperative activity resulting from start-up development via the passage of calendar time from that due to association with VCs. An analysis of the 696 start-ups in the sample (split by an external funding source) suggests substantial boosts in both cooperative activity associated with VC-backed firms and in the likelihood of an initial public offering.