Data Description

In what follows, we will describe the data set in more detail and introduce the variables necessary for our regressions.

Firm Characteristics

First of all, we have information about the project and the respective portfolio com-pany. The variable AGE represents the age of the firm when the corresponding financing round was closed. The variable FINISHED PRODUCT indicates whether the firm has a product that can be sold. Moreover, we observe the firm’s industry: LIFE-SCIENCE, IN-TERNET, IT/TELECOM, TRADITIONAL HIGH-TECH INDUSTRIES and OTHER INDUSTRIES are all dummy variables that indicate the project’s industry. The dummy GROWTH INDUSTRIES is a dummy variable that indicates whether the firm’s industry

6 For 8,5% we do not have any information about the investment phase.

is research intensive, that is whether it is a Biotech, IT/Telecoms or a Traditional High-Tech firm. Furthermore, we observe the firm’s development stage in each financing round.

On the one hand, we know whether the firm has finished its product tests, if it already has a finished product, if the firm holds any patents or if it even has reference customers. On the other hand, we have information about the development stages as defined by the Ger-man Venture Capital Association. We distinguish seed and start-up firms and expansion and later stage firms: the dummy EARLY STAGE indicates whether the firm belongs to the first group (dummy equals one) or not (dummy equals zero). Furthermore, we often have the firms’ balance sheet data at the date of each financing round: we know if the firm has any revenues (if this is the case the dummy REVENUES takes value 1) and whether its balance sheet is audited or not (if this is the case the dummy AUDITED BALANCE SHEET takes value one). We also know the size of the firm’s balance sheet. Moreover, the FIXED ASSET RATIO (FAR) indicates the ratio of fixed assets to balance sheet total whereby we use balance sheet data of the year preceding the year of closing of the corresponding financing round⁷. Finally, we know if the portfolio company has received funding from other investors apart from the VC we are looking at. We define a dummy OUTSIDE FINANCE that takes value one if the portfolio company has received bank, angel or other VC finance before the first round of VC financing we are looking at or if VC financing takes place via a syndicate of various VCs.

Last but not least, we have information about the entrepreneurs running the portfolio firm.

We know whether we face a repeat entrepreneur, i.e. if any of the founders has already run a firm (this is captured by the dummy variable REPEAT ENTREPRENEUR). We also know whether any of the founders has a background in engineering, which we code as SCIENCE BACKGROUND. If any of the founders has a PhD or a degree above⁸, we code the variable RESEARCH DEGREE to take value one.

7 As we have many missing values in our sample, we adopt the following procedure. For all firms in a

first financing round with an age of less than one year at the date of contracting and an investment phase of seed or early, we set the fixed asset ratio to zero. If we lack information for higher rounds, we use the same ratio as in the round before. If this ratio is not available, we code both as missing value. Additionally, we do not resort to the preceding round in the case of second rounds where we coded the first round data to be zero.

8 In Germany, this means doctoral degrees, a Habilitation, a Privatdozent or a professorship.

2.2.1 Investment Conditions

Second, we have information, about the investment conditions. We classify each VC ac-cording to his type into three categories named INDEPENDENT VC, PUBLIC VC and OTHER VCs. The latter category includes both bank(-dependent) and corporate VCs⁹. Additionally, we know whether the VC’s are specialized in specific industries or develop-ment stages. Moreover, we observe the total amount invested, the financing instrudevelop-ment used and the timing of the investment. We define a dummy variables for the occurrence of staging. The STAGING dummy captures whether the project is financed in several steps or not.

Also, we observe the year when the financing round is closed and define three time dum-mies. PERIOD 1 takes value one if the financing round was closed during the early period of relatively low venture capital activity, namely before 1998, PERIOD 2 if it was closed during the boom, i.e. between 1998 and 2000 and PERIOD 3 if it was closed after 2000 -a period of rel-ative decline -and reorg-aniz-ation of the venture c-apit-al industry.

2.2.2 Voting and Control Rights

Most important of all we know the amount of voting rights the VC holds. We code this as VOTING RIGHTS/CASH-FLOW RIGHTS. We repeat the same exercise for the amount of voting rights the VC has on the firm’s board: BOARD VOTING RIGHTS. VC VOTING MAJORITY and BOARD MAJORITY are dummy variables that take value one if the VC has a majority in either the firm’s shareholder meeting or on the firm’s board. Finally, we measure the degree of supermajority provisions by looking at the REQUIRED DECISION MAJORITY and the BOARD REQUIRED MAJORITY. Our previous measures for the VCs majorities take these into account.

Of course, we observe the types of control rights used in the firm: VETO RIGHTS is the sum of the following veto rights: OPERATIONAL VETO RIGHTS, STRUCTURAL VETO RIGHTS, VETO ASSET SALES, and the two veto rights against profit distribu-tion, both for the board and for shareholders. OPERATIONAL VETO RIGHTS is the sum of the veto rights that govern the entrepreneur’s actions in the firm: a veto against

9 We also include the business angels in our sample in this category.

changes in the firm’s line of business, a veto right against certain financial decisions such as capital expenditures or the use of derivative instruments, a veto right against changes in the firm’s head count and veto’s against other decisions, i.e. against lawsuits on behalf of the firm. STRUCTURAL VETO RIGHTS is the sum of the veto rights that secure the VC’s position in the firm: A veto right against changes in the shareholders’ agreement, a veto that forbids the firm’s dissolution and a veto against changes in the firm’s capital structure such as giving out new shares. Often the shareholders have a veto right against the use of the firm’s profit.

LIQUIDATION RIGHTS is the sum of a debt dummy and the STAGING dummy. We also create two dummies that take value one when a VC (or an independent VC) has any liquidation right. The PUT OPTION dummy takes value one when then VC has the right to put his shares to the entrepreneur after a specific period of time, that is when he is able to force a buy-back by the entrepreneur. The DRAG ALONG tells us whether the VC has the right to force the entrepreneur to sell his stake to an (outside) bidder while the TAKE ALONG dummy tells us whether the VC has the right to demand from the entrepreneur to include his stake in any sale of the entrepreneur’s stake. We code all this variables to take value if these rights are presents. Sometimes qualifying conditions are present. However, for sake of simplicity, we do not consider these elements here.

The EXIT RIGHTS dummy is the sum of the sale rights found in the sample, that is the sum of the dummy for the existence for an anti-dilution protection, the VC’s preemption right dummy, the drag and take (tag) along dummies and finally the info duty dummy.

The preemption right allows the VC to buy the entrepreneur’s stake in the firm if the entrepreneur were to sell his stake for the price paid by the potential buyer, while the info duty dummy forces the entrepreneur to inform the VC about potential buyers of the firm that approach the entrepreneur. We also code the presence of IPO rights: Piggy back rights allow the VC to include his shares in any offering of the founder’s shares in a public market, while the priority registration right allows the VC to register his shares with priority to those of the entrepreneur in case not all can be listed at once.

We also know whether the VC has a LIQUIDATION PREFERENCE (that is if his claims are senior to those of the entrepreneur, even if both hold equity). We also have a dummy variable called RIGHT TO REPLACE ENTREPRENEUR that takes value one exactly

when the VC has this right. ANTI-COMPETITION CLAUSE takes value one if the VC has the right to ban the entrepreneur to work in a related industry if he leaves the firm.

Finally FOUNDER VESTING takes value one if the entrepreneur is not allowed to keep all his equity in firm if he resigns from his position in the firm. We do not discern whether there is a difference between the VC firing the entrepreneur or the entrepreneur leaving on his own.

2.2.3 Other Variables

Finally, we observe several other variables: First, the DUMMY VC MAJORITY indicates whether the VC has the majority of voting rights in the firm. Second, TIME TO EXIT denotes the time the VC thinks he needs to exit the venture¹⁰. The DUMMY TRADE SALE EXPECTED indicates whether the VC thinks that a trade sale is expected by the VC. This expectation is often stated by the VC in his investment memorandum. The fact that this is stated in the investment memorandum means that the VC expects this prior to him signing the contract with the entrepreneur, but that the entrepreneur is not necessarily aware of this. Therefore, causality should run from the expectation of the possibility of a TS to the inclusion of the term in the contract.

10We often had no information about this variable, as we took it directly from the VC’s investment

memorandi. For the programmes covered, KfW’s maximum investment horizon was ten years. Thus, we set this variable to 10 when we faced an investment with debt only and no information about the expected contract duration. We ran robustness checks and found no differences in our results.

Table1:DescriptiveVariables:Rounds-Robustness1 FullSample1stRoundsonly2ndRoundsonly3rdRoundsandmore egoryVariableObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.DevObsMeanStd.Dev etoRightsVetoShareholder’sAgreement122.9918033.090535735.9714286.169030934105310 VetoAssetSales94.7340426.444210825.68.476095226.7307692.452344343.7674419.4274626 VetoCapitalStructure122.9016393.299029735.8857143.322802934.9117647.287902253.9056604.2950978 VetoBusinessPlan85.4117647.495073824.5.510753924.4166667.503610237.3513514.4839775 VetoOthers94.6276596.486020524.5833333.503610226.6538462.485164544.6363636.4866071 VetoFinancialDecisions95.6105263.490217925.68.476095227.6296296.492102943.5581395.5024855 VetoHeadCount88.6590909.476731324.75.442325925.72.458257639.5641026.5023561 VetoCompanyDissolution122.9344262.248556335.9428571.235504134.9411765.238832653.9245283.2666788 BoardVetoProfitDistribution74.9189189.274822817.8235294.392952622.9090909.294244935.9714286.1690309 ShareholdersVetoProfitDistribution98.7857143.412435624.625++.494535428.8214286.39002146.8478261.3631584 otingRightsRequiredDecisionMajority11154.1952310.069443154.0645210.188023455.0785310.908684653.630439.511067 VCVotingMajority128.34375.476825137*.1081081+++.314800137◦◦.2972973.463373254.537037.5033084 VotingRights/Cash-FlowRights12841.7035222.3733337*30.69027+++18.713137◦◦39.1629720.625535450.9903722.26202 BoardVotingRights7248.6431923.816171941.47316++21.940032145.6190523.152583254.88524.40976 BoardVCcontrol72.4444444.500391119.2105263+++.418853921◦◦.3809524.497613432.625.4918694 Boardrequiredmajority5648.2203612.1861548.9113314.757831646.87512.52548.666810.67211 Boardexists?129.627907.485247538.5+.506711737.6486486.483977554.7037037.4609109 erminationRightsVChasterminationrights1291.310078.5836101381.526316+++.506009437◦◦◦1.405405.4977427541.092593.622488 IndVChasterminationrights98.9693878.1731504321+026◦1040.925.2667468 Staging127.9055118.2936651351+++0371055.7818182.4168182 Debt130.5076923.501874838*.6578947++.480782937.4594595.505227955.4363636.5005048 PutOption112.1696429.377005633.1212121.33143432.21875.420013447.1702128.3798826 RightsAntiDilutionProtection116.4396552.498498530*.2333333+++.430183134.4411765.503994752.5576923.501506 VCpreemption116.8362069.371693333.7272727+.45226733.8484848.364109550.9.3030458 Epreemption116.3793103.487320533.3030303.466693733.3939394.496197750.42.4985694 DragAlong118.5847458.494867233.4545455++.505649934.5588235.503994751.6862745.4686233 TakeAlong118.6949153.462406833.5454545++.505649934.6764706.474858151.8039216.4009792 InfoDuty112.2946429.45793132.1875+.396557833.2727273.45226747.3829787.4913686 RightsPiggyback116.0344828.1832572340+032.03125.176776750.06.2398979 PriorityRegistration97.0103093.10153462700280042.0238095.1543033 hersLiquidationpreference121.4876033.501924734.3529412++.485071334.4411765.503994753.6037736.4937931 RighttoReplaceEntrepreneur127.3858268.488717936**.1388889+++.350736236◦.3611111.487136155.5636364.5005048 FounderVesting123.1626016.37051135.1714286.382385335.1142857.322802953.1886792.3949977 Anti-competitionclauses123.796748.404064435.7428571.443439634.7941176.410425654.8333333.3761774 es:Summarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.Onlyfirmsthathavethreeroundsat mumareconsidered.Thefirstsectionstatestheresultsforthecompletesample,theotherthreeareforallobservationsinthefirst,secondand irdorhigherroundsrespectively.***,**,*denotesstatisticalsignificanceatthe1%,5%,and10%levelrespectivelyforthedifferencebetweenthe standsecondround.+++,++,+istheanalogeforthedifferencebetweenthefirstandthirdround,while◦◦◦,◦◦,◦denotesstatisticalsignificance etweenthesecondandthirdround.

Table2:DescriptiveVariables:Rounds-Robustness2 egoryVariableFullSample1stRoundsonly2ndRoundsonly3rdRoundsandmore egoryVariableObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.DevObsMeanStd.Dev etoRightsVetoShareholder’sAgreement187.973262.1617497117.974359++.158741748.9583333.20194092210 VetoAssetSales170.8.4011817107.8317757.375825744.75.438018819.7368421.4524139 VetoCapitalStructure186.8064516.3961453116.7931034.406838148.8333333.376621822.8181818.394771 VetoBusinessPlan166.5963855.4921064105.5809524.495769644◦◦.7045455.461521517.4117647.5072997 VetoOthers158.6075949.489838797.628866.485617942.5238095.505486719.6842105.4775669 VetoFinancialDecisions168.702381.4585779105.7047619++.458337544.8181818.390153719.4210526.5072573 VetoHeadCount166.6385542.4818729103.631068.48487544◦.7272727.450510619.4736842.5129892 VetoCompanyDissolution188.9042553.2950265118.9152542.279690648.8958333.308709322.8636364.3512501 BoardVetoProfitDistribution117.8974359.304693669.884058.322500933.9090909.291937115.9333333.2581989 ShareholdersVetoProfitDistribution172.6744186.4699598107.635514+.483550644.7045455.461521521.8095238.4023739 otingRightsRequiredDecisionMajority17852.206017.17798510953.052028.4000524950.51023.5714292051.755.910517 VCVotingMajority207.1884058.3919838133.1353383+++.343377952◦◦.1923077.397958622.5.5117663 VotingRights/Cash-FlowRights20730.815624.27373133**26.11534+++23.009565235.7540423.557992247.5581824.70269 BoardVotingRights7343.4179528.290273740.6716229.275212139.7928623.121041555.2673330.95881 BoardVCcontrol68.3088235.465443232.1875++.396557821◦.2857143.4629115.6.5070926 Boardrequiredmajority6249.4732310.013582850.0239311.148612050.83353.7275251446.4285713.36306 Boardexists?211.4075829.4925534138**.3115942+++.464832251◦◦◦.4901961.504878222.8181818.394771 erminationRightsVChasterminationrights208.9951923.7256355137***1.131387+++.715557450.76.715997921.6666667.5773503 IndVChasterminationrights151.8609272.347174100**.92.272659936.7222222.454256815.8.4140393 Staging215.4604651.4995978141.4822695.501466952.4038462.495454522.4545455.5096472 Debt215.6790698.4679235141***.7659574++.424908452.5384615.503382222.4545455.5096472 PutOption186.1397849.3476997122.1557377.364101847.106383.311660517.1176471.3321056 RightsAntiDilutionProtection198.2222222.4167936127.1574803+++.365695650◦◦.26.443087521.5238095.5117663 VCpreemption188.5478723.4990319125.496++.50199644.5909091.497350319.7894737.4188539 Epreemption188.1914894.3945239125.2.401609744.1363636.347141819.2631579.4524139 DragAlong193.2901554.4550143126*.1984127+++.400396647◦◦◦.3404255.478975220.75.4442617 TakeAlong192.4114583.4933845126**.3253968+++.470393347◦◦.5106383.505291219.7368421.4524139 InfoDuty190.1789474.3843209126.1349206++.343002647.212766.413688117.4117647.5072997 RightsPiggyback184.0163043.12698881160048.0416667.201940920.05.2236068 PriorityRegistration167.0179641.13322031070044.0454545.210707116.0625.25 hersLiquidationpreference188.3191489.4673916121.2479339+++.433608747◦◦◦.3404255.478975220.7.4701623 RighttoReplaceEntrepreneur200.225.4186302129.1627907+++.370613949◦◦◦.2244898.421569822.5909091.5032363 FounderVesting198.0909091.2882085128.0703125.256677649.0816327.276641721.2380952.4364358 Anti-competitionclauses200.715.4525472129.7054264.457628149.7142857.456435522.7727273.428932 es:Summarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.Onlyfirmsthatarenotfinanceduntil eak-evenareconsidered.Thefirstsectionstatestheresultsforthecompletesample,theotherthreeareforallobservationsinthefirst,secondand irdorhigherroundsrespectively.***,**,*denotesstatisticalsignificanceatthe1%,5%,and10%levelrespectivelyforthedifferencebetweenthe standsecondround.+++,++,+istheanalogeforthedifferencebetweenthefirstandthirdround,while◦◦◦,◦◦,◦denotesstatisticalsignificance etweenthesecondandthirdround.

Table3:DescriptiveVariables:Rounds-Robustness3 CategoryVariable1stRoundsonly3rdRoundsandmore CategoryVariableObsMeanStd.Dev.ObsMeanStd.Dev. VetoRightsVetoShareholder’sAgreement52103410 VetoAssetSales40.825.384807626.8076923.4019185 VetoCapitalStructure52.9230769.269069134.9411765.2388326 VetoBusinessPlan37.4864865.506711719.4736842.5129892 VetoOthers36.7777778.42163726.7692308.4296689 VetoFinancialDecisions37.8108108.397061326.6923077.4706787 VetoHeadCount38.6315789.488851522.6818182.4767313 VetoCompanyDissolution52.9807692.13867534.9705882.1714986 BoardVetoProfitDistribution321025.96.2 ShareholdersVetoProfitDistribution41.7804878.419058229.9655172.1856953 VotingRightsRequiredDecisionMajority3951.538466.8011072753.370379.989025 VCVotingMajority55***.3090909.46637835.7142857.4583492 VotingRights/Cash-FlowRights55***38.8480424.361463558.52822.04075 BoardVotingRights29*50.4413822.23152461.6662522.97963 BoardVCcontrol28**.4285714.503952624.75.4423259 Boardrequiredmajority2149.2071412.334051848.1483312.64021 Boardexists?57***.5614035.500626235.8285714.3823853 TerminationRightsVChasterminationrights55*1.309091.5732535351.085714.5621089 IndVChasterminationrights49.9387755.242226127.9259259.2668803 Staging56.7678571.426020536.8055556.4013865 Debt57.4912281.504366936.3611111.4871361 PutOption51.1568627.3672930.1666667.379049 SaleRightsAntiDilutionProtection52***.4615385.503382234.7647059.4305615 VCpreemption53***.7358491.445099132.96875.1767767 Epreemption53.3773585.489364432.5.5080005 DragAlong51***.5294118.504100833.8787879.331434 TakeAlong52***.5961538.495454533.9090909.2919371 InfoDuty51***.2941176.46017930.4.4982729 IPORightsPiggyback49.0612245.242226131.0645161.249731 PriorityRegistration40.05.220721425.04.2 OthersLiquidationpreference54.5925926.495965635.7428571.4434396 RighttoReplaceEntrepreneur53***.3962264.493793136.7222222.4542568 FounderVesting53.2830189.454776334.2647059.4478111 Anti-competitionclauses54.8703704.339049535.8571429.3550358 es:Summarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.Onlyfirmswhosedealsweredonein ethirdperiodareused.Thefirstsectionstatestheresultsforthecompletesample,theotherthreeareforallobservationsinthefirst,secondand irdorhigherroundsrespectively.***,**,*denotesstatisticalsignificanceatthe1%,5%,and10%levelrespectivelyforthedifferencebetweenthe standsecondround.+++,++,+istheanalogueforthedifferencebetweenthefirstandthirdround,while◦◦◦,◦◦,◦denotesstatisticalsignificance etweenthesecondandthirdround.

Table4:DescriptiveVariables:Rounds-Robustness4 FullSample1stRoundsonly2ndRoundsonly3rdRoundsandmore egoryVariableObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.Dev. etoRightsVetoShareholder’sAgreement262.9847328.1228482146.9863014.116636978.974359.1590853810 VetoAssetSales203.8128079.39103114.8157895.389367362.7903226.410401527.8518519.362014 VetoCapitalStructure262.9312977.2534313146.9246575.264851778.9358974.246520938.9473684.2262943 VetoBusinessPlan189.5555556.4982238110.5636364.498203658.5862069.496813821.4285714.5070926 VetoOthers193.7202073.4500648106.7264151.447916258.6896552.466675329.7586207.4354942 VetoFinancialDecisions196.6938776.4620615109.7155963.453213760.7166667.454419627.5555556.5063697 VetoHeadCount190.7.4594683109.6972477.461571158.7241379.450851223.6521739.4869848 VetoCompanyDissolution262.9465649.22533146.9520548.214385878.9358974.246520938.9473684.2262943 BoardVetoProfitDistribution148.8581081.350124176.8026316+++.400657450◦◦.88.32826072210 ShareholdersVetoProfitDistribution200.705.4571872107.6261682+++.486096662◦◦.7419355.441141731.9032258.3005372 otingRightsRequiredDecisionMajority23051.944966.8806812651.529136.2040457252.050976.9464983253.343759.014717 VCVotingMajority279.2724014.4459953160.2+++.401255980◦◦◦.2625.442768939.5897436.4983102 VotingRights/Cash-FlowRights27941.7684720.2730116037.33551+++19.801680◦◦44.4787518.039423954.3953820.68177 BoardVotingRights14643.327421.22117840.15+++20.0847943◦◦41.9486119.081892555.612424.41109 BoardVCcontrol145.3172414.467015577.2337662+++.426000543◦◦.3023256.464700825.6.5 Boardrequiredmajority11450.441849.97356351.857629.4093893248.958449.4068841948.2457912.29142 Boardexists?281.6014235.4904787163.5582822++.498121980◦.6125.490253138.7631579.4308515 erminationRightsVChasterminationrights2761.210145.6144076159**1.289308+.5990067791.113924.6402592381.078947.5873246 IndVChasterminationrights250.912.2838632153.9346405.247970867.8656716.343578430.9.3051286 Staging272.7573529.4294736156.7628205.426723177.7272727.448282239.7948718.4090739 Debt285.4912281.5008024165*.5393939.49996381.4197531.496593339.4358974.5023561 PutOption235.1276596.3344227137.1240876.330891366.1363636.34580432.125.3360108 RightsAntiDilutionProtection249.4297189.496033139.3669065++.483703872.4583333.501757538.6052632.4953554 VCpreemption247.7732794.4195606142***.6971831+++.461103270.8571429.352453735.9142857.2840286 Epreemption247.340081.474698142.3239437.469635470.3571429.482617135.3714286.4902409 DragAlong248.5604839.4973319142.5+++.501769970◦.5714286.498444836.7777778.421637 TakeAlong247.6315789.4833558141.5602837+++.498122170◦.6714286.473085136.8333333.3779645 InfoDuty239.2970711.4579271139.2446043+.43140768.3529412.481437732.40625.4989909 RightsPiggyback237.0295359.1696613133.0300752.1714469.0289855.168994835.0285714.1690309 PriorityRegistration197.035533.1855943109.0366972.188885958.0344828.184059230.0333333.1825742 hersLiquidationpreference255.5254902.5003318146.4726027++.500967471.5492958.501105438.6842105.4710691 RighttoReplaceEntrepreneur258.3527132.4787431143.2797203+.450439476◦.3421053.477566939.6410256.4859705 FounderVesting252.1785714.3837552140.1857143.390272375.1333333.342223837.2432432.4349588 Anti-competitionclauses256.8085938.3941787145.8137931.390622873.7945205.406847838.8157895.3928595 es:Summarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.OnlyfirmsfoundedbyindependentVCs considered.Thefirstsectionstatestheresultsforthecompletesample,theotherthreeareforallobservationsinthefirst,secondandthirdor gherroundsrespectively.***,**,*denotesstatisticalsignificanceatthe1%,5%,and10%levelrespectivelyforthedifferencebetweenthefirstand condround.+++,++,+istheanalogeforthedifferencebetweenthefirstandthirdround,while◦◦◦,◦◦,◦denotesstatisticalsignificancebetween esecondandthirdround.

Table5:DescriptiveVariables:Periods-IndependentVCsonly-Robustness5 FullSample1stPeriodonly2ndPeriodonly3rdPeriod egoryVariableObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.DevObsMeanStd.Dev etoRightsVetoShareholder’sAgreement262.9847328.122848224.9583333.2041241148.9797297.14140199010 VetoAssetSales203.8128079.3910320***1+++0119.7983193.402951764.78125.4166667 VetoCapitalStructure262.9312977.253431324**.7083333+++.4643056148◦◦.9324324.251854790.9888889.1054093 VetoBusinessPlan189.5555556.498223820.6.5026247117.5213675.501691852.6153846.4912508 VetoOthers193.7202073.450064817.5294118++.5144958114◦◦.6929825.463293262.8225806.3851418 VetoFinancialDecisions196.6938776.462061520.65.4893605116.6810345.468097760.7333333.4459485 VetoHeadCount190.7.459468320.8.4103913114.6842105.466881856.6964286.4639609 VetoCompanyDissolution262.9465649.2253324.875.337832148◦◦.9324324.251854790.9888889.1054093 BoardVetoProfitDistribution148.8581081.350124112.75.45226775◦◦◦.7733333.421494661.9836066.1280369 ShareholdersVetoProfitDistribution200.705.457187219.5263158+++.5129892112◦◦◦.5892857.494174669.942029.2354007 otingRightsRequiredDecisionMajority23051.944966.880682153.650959.48148313651.357875.6811137352.547957.951312 VCVotingMajority279.2724014.445995324.0833333+++.2823299161◦◦◦.1614907.369131194.5106383.5025672 VotingRights/Cash-FlowRights27941.7684720.2730124*29.33625+++20.12896161◦◦◦37.5552816.760069452.1588521.57209 BoardVotingRights14643.327421.2211841.7924.7077976◦◦◦35.1739516.976226253.5203221.38562 BoardVCcontrol145.3172414.46701557***0+++076◦◦◦.1842105.390231662.516129.5038194 Boardrequiredmajority11450.441849.97357***50+++060◦52.2286.3152364748.2274513.56457 Boardexists?281.6014235.490478725*.36+++.4898979160◦◦.56875.496805896.71875.4519694 erminationRightsVChasterminationrights2761.210145.6144076241.291667.55003291591.232704.6383817931.150538.5887761 IndVChasterminationrights250.912.283863220***1+++0147.9047619.294547183.9036145.2969133 Staging272.7573529.429473623.7826087.4217412153.7385621.44086196.78125.4155687 Debt285.4912281.500802425.72+++.4582576163◦◦◦.5521472.498805797.3298969.4726179 PutOption235.1276596.334422721.0952381.3007926131.129771.337341383.1325301.3411274 RightsAntiDilutionProtection249.4297189.49603324***.0416667+++.2041241136◦◦◦.3308824.472270389.6853933.46699 VCpreemption247.7732794.419560622***.4090909+++.5032363137◦◦◦.7372263.441755788.9204545.2721389 Epreemption247.340081.47469822.1818182++.394771137.3138686.465766788.4204545.4964608 DragAlong248.5604839.497331922**.2272727+++.428932140◦◦◦.5.501795386.744186.4388768 TakeAlong247.6315789.483355822**.3181818+++.4767313138◦◦◦.557971.498437287.8275862.3799295 InfoDuty239.2970711.457927121.0952381+++.3007926135◦◦◦.2074074.406959983.4939759.503003 RightsPiggyback237.0295359.1696613200++0133◦◦.0075188.08671184.0714286.2590862 PriorityRegistration197.035533.1855943200++0112.0178571.133027365.0769231.2685431 hersLiquidationpreference255.5254902.500331821***.1428571+++.3585686143◦◦◦.4405594.498199391.7472527.436995 RighttoReplaceEntrepreneur258.3527132.478743122**.0909091+++.2942449143◦◦◦.2377622.427209193.5913978.4942398 FounderVesting252.1785714.383755220***0+++0142◦◦◦.1056338.308456490.3333333.4740455 Anti-competitionclauses256.8085938.394178721***.4761905+++.5117663145.8137931.390622890.8777778.3293773 es:Summarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.OnlyfirmsfoundedbyindependentVCs considered.Thefirstsectionstatestheresultsforthecompletesample,theotherthreeareforallobservationsinthefirst(1990-1997),second andthird(2001-2004)timeperiodrespectively.***,**,*denotesstatisticalsignificanceatthe1%,5%,and10%levelrespectivelyforthe fferencebetweenthefirstandsecondround.+++,++,+istheanalogeforthedifferencebetweenthefirstandthirdround,while◦◦◦,◦◦,◦denotes significancebetweenthesecondandthirdround.

Table6:DescriptiveVariables:Periods-Robustness6-OnlyFirstRounds AllPeriodsPeriod1Period2Period3 egoryVariableObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.DevObsMeanStd.Dev etoRightsVetoShareholder’sAgreement146.9863014.116636919.9473684.229415794.9893617.10314213310 VetoAssetSales114.8157895.389367315***1++076.8026316.400657423.7391304.4489778 VetoCapitalStructure146.9246575.264851719.7894737++.418853994◦◦◦.9255319.26393883310 VetoBusinessPlan110.5636364.498203615.7333333.457737775.52.502964220.6.5026247 VetoOthers106.7264151.447916212.5833333.514928773.7260274.449081621.8095238.4023739 VetoFinancialDecisions109.7155963.453213715.8.414039374.6756757.471317220.8.4103913 VetoHeadCount109.6972477.461571115*.8666667.351865873.6712329.473016221.6666667.4830459 VetoCompanyDissolution146.9520548.214385819.9473684.229415794◦◦.9361702.24576023310 BoardVetoProfitDistribution76.8026316.40065747.7142857.4879547◦◦◦.7234043.45215082210 ShareholdersVetoProfitDistribution107.6261682.486096614.4285714+++.513552670◦◦◦.5714286.498444823.9130435.2881041 otingRightsRequiredDecisionMajority12651.529136.2040451651.041874.16758451.380955.8266212652.307698.274149 VCVotingMajority160.2.401255919.1052632+++.3153018105◦◦◦.1333333.34156536.4444444.5039526 VotingRights/Cash-FlowRights16037.3355119.80161931.92895++20.9142105◦◦35.2598117.271843646.2431123.65346 BoardVotingRights7840.1520.08479548.19829.6581849◦◦◦34.5830616.649442449.8391720.99892 BoardVCcontrol77.2337662.42600054***0+++049◦◦◦.1428571.353553424.4583333.5089774 Boardrequiredmajority6351.857629.4093894***5004053.3427.5177231949.1236812.99826 Boardexists?163.5582822.498121920**.3+++.4701623105.5619048.498532638.6842105.4710691 erminationRightsVChasterminationrights1591.289308.5990067191.263158.56195151041.326923.614427361.194444.5766625 IndVChasterminationrights153.9346405.247970816***1+0102.9313725.25406835.9142857.2840286 Staging156.7628205.426723118.7222222.4608886101.7821782.414824337.7297297.4502252 Debt165.5393939.49996320.75+++.4442617107◦◦◦.5700935.497392238.3421053.4807829 PutOption137.1240876.330891316.0625.2587.137931.346826634.1176471.327035 RightsAntiDilutionProtection139.3669065.483703819***.0526316+++.229415786◦.3604651.482951534.5588235.5039947 VCpreemption142.6971831.461103217**.4117647+++.507299790.7.460824935.8285714.3823853 Epreemption142.3239437.469635417**.1176471++.332105690.3333333.474045535.4.4970501 DragAlong142.5.501769917.2941176++.469668292◦.4782609.502264333.6666667.4787136 TakeAlong141.5602837.498122117.4117647+.507299790◦.5333333.501682634.7058824.4624973 InfoDuty139.2446043.43140716.125++.34156589◦◦.1910112.395325134.4411765.5039947 RightsPiggyback133.0300752.17144150+085.0117647.108465233.0909091.2919371 PriorityRegistration109.0366972.1888859150069.0289855.168994825.08.2768875 hersLiquidationpreference146.4726027.500967416**.1875+++.403112994◦◦.4468085.499828436.6666667.4780914 RighttoReplaceEntrepreneur143.2797203.450439417.1176471+++.332105691◦◦◦.1978022.400549135.5714286.5020964 FounderVesting140.1857143.390272315***0+++090◦◦◦.1333333.34183935.4.4970501 Anti-competitionclauses145.8137931.390622816.625+.594.8191489.386958535.8857143.3228029 es:Summarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.Thefirstsectionstatestheresultsforthe pletesample,theotherthreeareforallobservationsinthefirst,secondandthirdorhigherperiodsrespectivelyforfirstroundsonlyfinancedby dependentVCs.***,**,*denotesstatisticalsignificanceatthe1%,5%,and10%levelrespectivelyforthedifferencebetweenthefirstandsecond nd.+++,++,+istheanalogeforthedifferencebetweenthefirstandthirdround,while◦◦◦,◦◦,◦denotesstatisticalsignificancebetweenthesecond dthirdround.

Table7:DescriptiveVariables:TimeToExit-Robustness7 FullSample1-3years4-6years7-10years egoryVariableObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.Dev.ObsMeanStd.Dev. oRightsVetoShareholder’sAgreement223.9820628.133021910810601055.9272727.2620818 VetoAssetSales198.7979798.40252593.7419355++.439941353.8113208.394997752.8846154.3226025 VetoCapitalStructure222.8648649.3426404108.9814815++.135445460◦◦◦.9833333.129099454.5.5046949 VetoBusinessPlan187.5347594.500129481.5679012+++.498454452.5769231.498867554.4444444.5015699 VetoOthers187.7700535.421927987.6896552+++.465316753◦◦.754717.434372247.9361702.2470922 VetoFinancialDecisions196.6734694.470144889*.6629213.475390353◦◦.7924528.409431654.5740741.4991257 VetoHeadCount191.5549738.498274883.6746988+++.471335355◦◦◦.6727273.473542453.245283.4343722 VetoCompanyDissolution225.9511111.2161165108**.9537037.211105662◦◦1055.8909091.3146266 BoardVetoProfitDistribution160.91875.274076575.88++.327149944.9318182.254971741.9756098.1561738 ShareholdersVetoProfitDistribution199.7638191.425805890.7666667.425322156.8035714.400891953.7169811.4547763 RightsRequiredDecisionMajority16453.103668.2897079251.78261+++6.85297150◦◦◦51.626.009822226212.23967 VCVotingMajority230.2565217.4376656115.3391304+++.47548661◦◦◦.3114754.466939854.0185185.1360828 VotingRights/Cash-FlowRights23036.6997522.8679211544.30784+++19.7576961◦◦◦43.0144317.053965413.3640719.08612 BoardVotingRights10545.9735220.077086748.1943321.647883242.8915615.14836637.6116723.76579 BoardVCcontrol104.3846154.488860267.4328358.499207932.28125.45680345.4.5477226 Boardrequiredmajority7950.527729.83749752*49.03231+++10.6404725◦◦◦52.33366.59746266.835.2333465 Boardexists?235.5234043.500518117.6923077+++.463523663◦◦◦.5714286.498846655.1090909.3146266 minationRightsVChasterminationrights2351.195745.6634401118***1.101695.6046802611.360656.578296561.214286.824936 IndVChasterminationrights185.9189189.2737003108.8888889+++.315734857◦.9473684.22528182010 Staging232.75.4339489115.7913043++.408154963◦◦.8095238.395830854.5925926.4959656 Debt238.5294118.5001861119***.3109244+++.464829163◦◦◦.5714286.498846656.9464286.2272078 PutOption211.2227488.4170806100.19.394277256.2321429.426020555.2727273.4494666 RightsAntiDilutionProtection205.4146341.4938648103.5533981+++.499571556◦◦◦.4464286.501620746.0652174.2496374 VCpreemption211.2227488.4170806100.19+++.394277256◦◦◦.2321429.426020555.2727273.4494666 Epreemption217.3870968.4882123105**.4666667.501280458.2931034.45916154.3333333.475831 DragAlong217.4470046.4983331103*.6407767+++.482118959◦◦◦.4915254.504219555.0363636.1889186 TakeAlong216.5555556.4980582103.6893204+++.465034858◦◦◦.637931.484796155.2181818.4168182 InfoDuty215.227907.4204612106.3113208+++.465233355◦◦◦.2727273.449466654.0185185.1360828 RightsPiggyback197.0456853.2093336101*.0792079+++.2714155.0181818.134844100 PriorityRegistration172.0465116.211205284***.0952381+++.295306647004100 hersLiquidationpreference220.4636364.4998132107.6448598+++.480807859◦◦◦.559322.500735400 RighttoReplaceEntrepreneur211.3364929.4736334108.4351852+++.498092657◦◦◦.3684211.486664346.0652174.2496374 FounderVesting205.1463415.3543134103.184466+++.389760456◦◦◦.1785714.386459146.0217391.147442 Anti-competitionclauses210.8095238.8253778105.8666667+++.34156556◦◦.94642861.43234949.5306122.5042338 es:Smmarystatisticsfor464investmentroundsinto290entrepreneurialfirmsbyventurecapitalfunds.Thevariableusedistherobustversionof wherenocorrectionfor”StilleGesellschaften”hasbeenmade.Thefirstsectionstatestheresultsforthecompletesample,theotherthreearefor observationsinthesample.Thesecondpartsummarizesthedistributionofvetorightsforexpectedcontractdurationsbetween1to3years,the irdpartfordurationsbetween3to6yearsandthefourthfordurationsbetween6to10years.***,**,*denotesstatisticalsignificanceatthe1%, and10%levelrespectivelyforthedifferencebetweenthetheshortestandmiddledurations.+++ ,++ ,+ istheanalogeforthedifferencebetween eshortestandlongestdurations,while◦◦◦ ,◦◦ ,◦ denotesstatisticalsignificancebetweenthemiddleandthelongestdurations.

Table8:Contractualelements:correlationsPartI (2*)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)(15)(16)(17)(18) oShareholder’sAgreement(1) oAssetSales(2)1.0000 oCapitalStructure(3)-0.00651.0000 oBusinessPlan(4)0.11580.09941.0000 oOthers(5)0.32230.21630.28971.0000 oFinancialDecisions(6)0.3170-0.02960.19240.10091.0000 oHeadCount(7)-0.06190.19640.2955-0.03010.26351.0000 oCompanyDissolution(8)0.05410.3404-0.04770.30270.04040.12911.0000 VetoProfitDistribution(9)0.04420.40830.23430.3669-0.1143-0.1472-0.01971.0000 sVetoProfitDist.(10)0.00000.35000.31690.4867-0.1078-0.07320.26910.86061.0000 uiredDecisionMajority(11)-0.01750.07460.21310.1576-0.09710.17960.0519-0.12560.02431.0000 VotingMajority(12)-0.01740.2523-0.09620.0715-0.01840.02740.13440.17090.3836-0.15661.0000 Rights/Cash-FlowRights(13)-0.00270.51210.12090.16680.00150.12730.17810.28760.4349-0.04020.82461.0000 VotingRights(14)-0.01230.37930.00130.1316-0.14940.1555.0.42540.17160.17750.28770.35301.0000 VCcontrol(15)-0.07620.1743-0.20000.0661-0.03500.1874.0.28870.14860.09260.37810.43340.79931.0000 requiredmajority(16)0.0728-0.0220-0.2287-0.12240.4158-0.1123.-0.0390-0.0405-0.73270.34010.2515-0.3866-0.20631.0000 exists?(17)-0.05140.2206-0.06850.0844-0.08890.10040.1066-0.10430.16830.10530.36770.3787...1.0000 hasterminationrights(18)-0.0504-0.1955-0.06700.10840.0126-0.0752-0.0341-0.0348-0.10680.1636-0.1432-0.2274-0.0875-0.1303-0.0695-0.06921.0000 dVChasterminationrights(19)-0.0414-0.0483-0.07940.1126-0.06430.1700-0.0392-0.0449-0.02640.1033-0.0926-0.08070.09960.0826-0.04720.02510.6270 &Puts(20)-0.11450.1068-0.00320.2452-0.0809-0.16370.11490.02720.23720.25850.04870.0238-0.0669-0.0561-0.02270.00720.5422 (21)-0.07670.0605-0.09600.1545-0.10990.01440.16910.07030.14960.0622-0.0513-0.0964-0.00910.0050-0.11800.03320.5861 (22)0.1638-0.3276-0.0477-0.09560.0478-0.1573-0.1744-0.0990-0.24150.0219-0.3226-0.4426-0.0758-0.10720.0092-0.27440.3637 Option(23)-0.05590.13110.09730.20350.0085-0.19670.0599-0.03830.13680.33660.04080.0440-0.0815-0.10720.0708-0.04410.1569 tiDilutionProtection(24)-0.13000.2759-0.06500.1513-0.10950.25310.08370.21140.29520.03080.33240.41610.24510.2139-0.05320.4033-0.1575 preemption(25).-0.14430.67840.27640.2637-0.04980.16440.31030.34990.48800.12720.28840.54220.33080.2242-0.03460.4249-0.1609 preemption(26).-0.10070.23120.10850.39570.00650.01620.10580.05840.15270.35980.00470.12040.23860.3150-0.32100.17600.0609 Along(27)0.13610.37500.22150.3613-0.09700.04960.17150.28100.4694-0.10850.46450.53950.18900.1176-0.07430.3981-0.1083 eAlong(28)-0.11930.47280.26050.1022-0.00480.20860.21620.21450.32770.03230.33690.52880.26150.1320-0.04640.4425-0.0688 foDuty(29)0.12350.22010.23430.1895-0.0962-0.01250.10050.14860.29760.03620.11140.21370.0710-0.1118-0.30300.3153-0.1439 back(30)-0.07860.07280.0415-0.01440.0536-0.13290.03330.06240.1145-0.08680.18200.20420.15190.12260.04660.12610.0294 iorityRegistration(31)-0.23890.08920.10100.00000.1052-0.17180.02850.06150.1137-0.06660.20110.25540.0275-0.0338-0.07230.0746-0.0193 quidationpreference(32)-0.00780.38120.13940.2428-0.15890.13230.13090.29880.4572-0.04930.37040.45200.29100.1411-0.05810.3886-0.1334 ttoReplaceEntrepreneur(33)-0.04980.2784-0.04370.1065-0.11530.08630.15680.20670.3754-0.00480.88510.78160.52070.6057-0.07040.4134-0.1517 erVesting(34)-0.11290.1634-0.08570.1697-0.0698-0.01880.09200.12170.2431-0.06930.36350.30740.07010.10370.28860.28580.0515 ti-competitionclauses(35)0.10350.1148-0.07880.11850.0529-0.05540.04660.00190.06750.1166-0.02650.0109-0.0702-0.1387-0.0323-0.0474-0.0327 Notes:Pairwisecorrelationsfor464investmentroundsinto290entrepreneurialfirms.Astericsdenotestatistical significanceatthe10%interval.*Forvariable1wecouldnotcomputeanyempiricalcorrelation.