For developing markets, including those in the Central and Eastern European
region, the available data on the venture capital sector at the investment level
are rather limited. While surveys on investment activity and capital outflows
are becoming more comprehensive, the study of firm-level effects, in particular exits,
is considered a major research gap. Using one of the most active
venture capital markets’ example in the region, this paper examines the exit
characteristics of firms in the region by exit type, as well as the main financial
characteristics that influence each exit method. Our analysis is based on a
unique hand collected dataset covering the entire population of the Hungarian JEREMIE
investments including the data from 340 companies that received funding between 2010
and 2016. The approach includes a detailed
assessment of key financial metrics, such as revenue growth, to understand
their impact on exit events. Firms are classified into three categories based
on exit mode, which are sale to 3rd party, manager buy-back and failed exit.
Logit models were used to examine the factors influencing each exit mode.
Our results show that among the financial characteristics, rapid revenue
growth is considered to be the most important success factor, while financial
characteristics can explain exit types only to a small extent. Due to the significant
regional state involvement, the characteristics of exit types do not necessarily coincide
with the exit patterns of traditional market-based investments despite of the hybrid
investment strategy. The study addresses a significant research gap concerning firm-level
effects, particularly exits, in the
venture capital sector of the Central and Eastern European region. Due to
significant state involvement, the characteristics of exit types do not necessarily
align with those of traditional market-based investments. This discrepancy underscores
the differences inherent in hybrid investment strategies
and emphasizes the unique economic context of the region.
