Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302271 
Year of Publication: 
2024
Series/Report no.: 
IFN Working Paper No. 1500
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
Startups face a trade-off between short-term profitability versus long-term growth where investors tolerate prolonged financial losses. We present a new theory and empirical evidence about the existence and shape of so-called J-curves. The theory predicts that investors facing better exit opportunities have a higher loss tolerance, encouraging startups to pursue more ambitious growth strategies. Empirically, we examine a large Swedish dataset with detailed cash flow information. Swedish startups backed by US venture capitalists experience deeper J-curves than those backed by non-US venture capitalists. They have more successful exits, higher exit values, faster sales growth, and more follow-on funding.
Subjects: 
Venture Capital
Loss tolerance
J-curves
Entrepreneurship
Exits
JEL: 
F39
G24
L26
O16
Document Type: 
Working Paper

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