On Friday 29 November 2013 Geertjan de Vries will defend his PhD thesis entitled 'Venture Capital: Relations with the Economy and Intellectual Property'. His supervisors are professor Enrico Pennings and professor Joern Block (both of Erasmus School of Economics). Other members of the doctoral committee are dr. Luca Berchicci, professor Justin Jansen (both from Rotterdam School of Management), and professor Roy Thurik (Erasmus School of Economics).
Time and location
The PhD defence will take place in the Senate Hall of Erasmus University Rotterdam and will start at 13.30 hrs.
About the dissertation
Venture capitalists (VCs) focus on the financing and advising of young innovative start-ups. Over the years, venture capitalism supported the creation of nowadays globally leading technology firms such as Google, Facebook, Microsoft, Intel and Apple. Overall, VC funds had a strong positive impact on firm growth, technological development, and the evolution of industries.
In his thesis, Geertjan de Vries conducts one of the first studies that provides empirical evidence regarding the effect of an economic crisis on VC activities. Studying the impact of the 2000-2001 dot-com crisis and the 2008-2009 financial crisis, the thesis investigates how a period of economic downturn affects VC activities across industries and countries. A period of economic crisis is associated with a decrease in the number of initial funding rounds and also with a decrease in the amount of funds invested in later funding rounds. These effects differed across industries and were stronger in the US than in other countries. With regard to syndication strategies, VCs had a lower tendency to syndicate investments during a period of economic crisis, and the size of the syndicates was smaller. The effect on syndication activities is primarily found for later-stage financing rounds. Overall, these findings can be explained by the worsening fund raising and exit opportunities during a period of economic crisis, forcing VCs to adjust their investment strategies.
Secondly, the thesis examines VC-backed start-ups’ intellectual property (IP) filings. Through IP rights, a firm can exclude others from the use of its company-specific intangible assets. The relationship between IP applications and start-up valuations by VCs is addressed, showing that the number and breadth of a start-up’s trademark applications have a positive yet decreasing effect on the financial valuations of start-ups by VCs. In addition, the impact of VC funding on a start-up’s IP orientation is examined, distinguishing between a trademark- and a patent orientated IP strategy. Results show that the incentive of a VC to start generating revenues on the market makes VC funded start-ups more likely to file initial IP in the form of a trademark rather than a patent.
The findings of this thesis are relevant for start-ups and VCs. Both should take the documented volatile nature of the VC market into account and aim to recognize changing conditions as early as possible and adapt planning accordingly. Similarly, governments should be aware of the strong effect of economic sentiment on venture capitalism as an important driver of innovative activity. Lastly, where market orientation tends to be valued by VCs, one way of documenting market orientation by start-ups is to begin defending their marketing assets by filing trademarks as soon as possible.
About Geertjan de Vries
Geertjan de Vries (1984) obtained his Master’s degree in Economics & Business at Erasmus School of Economics in 2008. In 2009 he started his PhD in Economics at the Tinbergen Institute. His work is published in Journal of Business Venturing, Venture Capital, and Oxford University Press. Currently, Geertjan works as an assistant professor at the Department of Applied Economics at Erasmus School of Economics.
Abstract of 'Venture Capital: Relations with the Economy and Intellectual Property'
This thesis analyses venture capital (VC) investments under changing economic conditions and in relation to start-ups’ intellectual property (IP) filings. Studying the impact of the 2000-2001 dot-com crisis and the 2008-2009 financial crisis, the first part of this thesis investigates how a period of economic downturn affects VC activities across industries and countries.
The second part of this thesis examines VC-backed start-ups’ IP filings. The relationship between IP filings and start-up valuations by VCs is addressed. In addition, part two analyses the impact of VC funding on a start-up’s IP orientation, distinguishing between a trademark- and a patent orientated IP strategy. Findings show a strong link between economic conditions and funding stages, funded amounts, and syndication activities in the VC market. With regard to IP, this thesis shows that VCs attach significant value to start-ups’ trademark applications.