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Market Timing in Venture Capital: Evidence from a Quantitative Analysis of U.S. Deals

Tångring, Erik LU and Sundling, Viktor LU (2025) NEKN02 20251
Department of Economics
Abstract
This study investigates the role of macroeconomic and financial market conditions at the time of entry and exit in shaping the performance of venture capital investments. Using a hand-collected dataset of 130 U.S.-based VC-backed deals from 2015 to 2024. The analysis links deal-level returns to contemporaneous macroeconomic indicators, including GDP growth, interest rates, NASDAQ returns, and IPO volume, at both investment entry and exit. Employing regression models with controls for investment stage, industry, and firm age, the results reveal that macroeconomic conditions at the time of entry exert a significant influence on subsequent VC returns, with investments made during periods of weaker GDP growth and higher interest rates yielding... (More)
This study investigates the role of macroeconomic and financial market conditions at the time of entry and exit in shaping the performance of venture capital investments. Using a hand-collected dataset of 130 U.S.-based VC-backed deals from 2015 to 2024. The analysis links deal-level returns to contemporaneous macroeconomic indicators, including GDP growth, interest rates, NASDAQ returns, and IPO volume, at both investment entry and exit. Employing regression models with controls for investment stage, industry, and firm age, the results reveal that macroeconomic conditions at the time of entry exert a significant influence on subsequent VC returns, with investments made during periods of weaker GDP growth and higher interest rates yielding superior performance. In contrast, the macroeconomic environment at exit generally has a more limited impact, except for a modest positive effect of lower interest rates. Furthermore, early-stage investments are found to be especially sensitive to entry-time macroeconomic conditions, while late-stage investments are more insulated and driven by firm-specific factors. These findings advance the literature by providing systematic, deal-level evidence on market timing effects in VC. Moreover, it suggests that incorporating macroeconomic context into entry decisions can enhance value creation, particularly for early-stage investments. The study also highlights methodological challenges, including survivorship bias and data limitations, while offering practical insights for fund managers and limited partners in optimizing capital deployment strategies in volatile environments. (Less)
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author
Tångring, Erik LU and Sundling, Viktor LU
supervisor
organization
course
NEKN02 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
venture capital, market timing, macroeconomic conditions, investment performance
language
English
id
9209339
date added to LUP
2025-09-12 10:44:20
date last changed
2025-09-12 10:44:20
@misc{9209339,
  abstract     = {{This study investigates the role of macroeconomic and financial market conditions at the time of entry and exit in shaping the performance of venture capital investments. Using a hand-collected dataset of 130 U.S.-based VC-backed deals from 2015 to 2024. The analysis links deal-level returns to contemporaneous macroeconomic indicators, including GDP growth, interest rates, NASDAQ returns, and IPO volume, at both investment entry and exit. Employing regression models with controls for investment stage, industry, and firm age, the results reveal that macroeconomic conditions at the time of entry exert a significant influence on subsequent VC returns, with investments made during periods of weaker GDP growth and higher interest rates yielding superior performance. In contrast, the macroeconomic environment at exit generally has a more limited impact, except for a modest positive effect of lower interest rates. Furthermore, early-stage investments are found to be especially sensitive to entry-time macroeconomic conditions, while late-stage investments are more insulated and driven by firm-specific factors. These findings advance the literature by providing systematic, deal-level evidence on market timing effects in VC. Moreover, it suggests that incorporating macroeconomic context into entry decisions can enhance value creation, particularly for early-stage investments. The study also highlights methodological challenges, including survivorship bias and data limitations, while offering practical insights for fund managers and limited partners in optimizing capital deployment strategies in volatile environments.}},
  author       = {{Tångring, Erik and Sundling, Viktor}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Market Timing in Venture Capital: Evidence from a Quantitative Analysis of U.S. Deals}},
  year         = {{2025}},
}