Yifat Aran is Assistant Professor of Business Law at the University of Haifa Faculty of Law, Brian Broughman is Professor of Law at Vanderbilt University Law School, and Elizabeth Pollman is the Perry Golkin Professor of Law at the University of Pennsylvania Carey Law School. This post is based on their article, Exit After Exit, forthcoming in the Harvard Business Law Review.
The IPO is commonly understood as the end of venture capital’s (VC) role in corporate governance. As the conventional story goes, after a relatively short post-IPO lock-up, VCs sell their shares and give way to public-market institutions. Ownership disperses, the balance of control shifts, and the company enters a new phase of its life governed by public-market discipline. In our article, we show that this paradigm is inaccurate: VCs often remain important shareholders and governance participants for years after the IPO.
Descriptive Statistics and Findings
Drawing on a dataset of 844 U.S. venture-backed companies that completed IPOs between 2002 and 2020, we find sustained VC ownership and influence well beyond the lock-up period. A full financial exit by VCs often takes years rather than months. VCs retain an aggregate equity stake above 5% in the median dual-class firm for three years after the IPO and in the median single-class firm for four years. Even by year seven, roughly a quarter of single-class firms and 14% of dual-class firms still have aggregate VC ownership above that threshold.
