Round duration and equity injection in venture capital. An empirical analysis in the medtech sector

ABSTRACT

The pandemic has brought extraordinary attention (and therefore funds) to the medical technology (medtech) sector. The urgent need for innovation in this industry is widely acknowledged; thus, venture capitalists (VCs) are playing a major role in supporting its renovation. The present research aims to identify how venture capitalists approach medtech companies, which are typically perceived as considerably risky. Specifically, the objective is to highlight the features of the control mechanisms employed by VCs when financing firms operating in the health care industry, with explicit focus on the staged structure of the investment. Previous studies have supported the hypothesis of shorter financing rounds with higher required equity stakes when a VC firm approaches a hazardous investment. To test the consistency of such evidence with the case of medtech firms, two sets of regressions on a unique dataset have been performed. The results reported show partial suitability of the expectations to the specific case.

KEYWORDS:

• Corporate finance
• technology
• healthcare
• venture capital
• investment

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The duration equations were been estimated also with the Negative Binomial Counts technique, with the same general results.

Additional information

Notes on contributors

Emanuele Teti

Emanuele Teti, PhD. is Associate professor of Corporate finance at University of Pisa. Author of several papers in main scientific peer-reviewed journals on topics referring to business and finance.

Leonardo Filippone

Leonardo Filippone, graduated in Business Administration at University of Pisa, analyst.

Giovanna Mariani

Giovanna Mariani, PhD, Full Professor of Corporate finance at University of Pisa and Director for the Master Degree Program in Bank, Finance and Financial Markets, University of Pisa.