Life Cycle Cash Flows of Ventures

We estimate the collective return to all investors in ventures in our sample over their life cycle. The net present value per dollar invested in the ?rst round of funding (NPV) is signi?cantly positive on average but comes down after 1999. The structural break follows the passage of the National Securities Markets Improvement Act (NSMIA). We develop a model to understand the e?ects of increased supply of capital due to NSMIA. Consistent with the model’s predictions, after NSMIA, ventures have lower NPVs, founders give up a smaller fraction of ownership to more experienced VCs, but they continue to add value.