Do companies that have received investment from venture capital (VC) firms continue to grow vigorously after their Initial Public Offering (IPO)? Or do "self-made" companies without VC backing demonstrate more sustained, long-term growth? This is a topic that anyone involved in the startup ecosystem has debated at least once, and we set out to examine it empirically through data. In particular, one widely circulated conventional wisdom is the "post-IPO burnout theory" — the notion that many startups are rushed into small-scale IPOs by their VC investors and consequently run out of steam after listing, unable to sustain growth. Is this actually true? Let us examine it with data and facts.
 

In "Lapis Lazuli," our information platform specializing in TSE Growth Market stock analysis, we classify the shareholders of all covered stocks based on the membership roster of the Japan Venture Capital Association (JVCA). For this analysis, we identified 276 companies whose shareholder composition at the time of listing (as disclosed in their IPO filings) included VC investors (including CVCs) — referred to as the "VC-backed group" — and 303 companies that did not — referred to as the "non-VC group." We then compared their Market Capitalization multiples since listing (current Market Capitalization divided by Market Capitalization at the time of IPO).

Results — The Non-VC Group Leads on Multiples, but...

※ The sample comprises 579 companies listed on the TSE Growth Market (including the former Mothers Market) for which both IPO Market Capitalization data and shareholder data are available (as of July 2026). As the JVCA membership roster includes both VCs and CVCs without distinction, "VC" in this analysis includes CVCs.

In terms of Market Capitalization growth alone, the non-VC group prevails. At the median, the non-VC group has grown modestly to 1.14x its IPO Valuation, while the VC-backed group stands at 0.78x. The proportion of companies exceeding their IPO Valuation also shows a considerable gap: 54.8% versus 38.0%. These findings could be cited as compelling evidence in support of the "post-IPO burnout theory."
 

However, when viewed from a perspective beyond Market Capitalization, an intriguing finding emerges. In fact, revenue growth is clearly faster among the VC-backed group (+17.7% vs. +11.2% annualized). In other words, the underlying business is growing faster than that of the non-VC group, yet the Market Capitalization has declined. This "disconnect" was the most compelling discovery of this analysis. Based on these observations, we propose two hypotheses.
 

Hypothesis 1: VC-backed companies are priced (Valued) more highly at IPO than non-VC companies.
When a company has received VC investment, entrepreneurs are naturally compelled to drive up their Valuation in order to deliver returns on investors' equity stakes. Lead Underwriters, in turn, face competitive pressure to present high Valuations in order to win mandates, creating a structural tendency toward elevated pricing. If a company is priced sufficiently high at IPO, the hurdle for the Market Capitalization to subsequently "exceed the IPO Valuation" will be commensurately higher, even as the business continues to grow.
 

Hypothesis 2: Entrepreneurs who accepted VC investment prior to listing demonstrate a high degree of commitment to growth (or at least cannot be characterized as having a lower commitment).
Entrepreneurs who have accepted external investors such as VCs are necessarily committed to growth. This fundamental orientation is expected to persist even after the IPO, when public market investors become shareholders. While Market Capitalization is subject to numerous uncontrollable factors — including broader financial market conditions — revenue growth can essentially be regarded as a direct scorecard of entrepreneurial execution. Setting aside whether that growth meets investor expectations, entrepreneurs who listed after accepting VC investment appear to have continued delivering measurable results in terms of revenue growth after their IPO. If Hypothesis 2 holds, the "post-IPO burnout theory" would be invalidated.
 

Verification — How Different Was the Entry Pricing?

Let us first examine Hypothesis 1 with data. Since share prices immediately following an IPO are subject to significant volatility around the First-day Opening Price, we calculated Market Capitalization based on the average share price over the six months post-listing, and compared the median valuation multiples for both groups — derived by dividing this figure by the most recent full-year actual results closest to the listing date.

※ Share prices are based on the six-month average post-listing (actual closing prices). The denominator reflects the most recent full-year actual results closest to the listing date (within ±400 days). The Price-to-Sales Ratio (PSR) and EV/Revenue multiples cover 550 companies (274 VC-backed, 276 non-VC); the Market Cap-to-Gross Profit Multiple covers 500 companies. Enterprise Value (EV) = Market Capitalization + interest-bearing debt − cash (based on the first fiscal year-end values post-listing).

The Price-to-Sales Ratio (PSR) is approximately 1.8x higher for the VC-backed group. Moreover, when examining the full distribution, the interquartile range of the VC-backed group (2.0x–13.6x) entirely exceeds that of the non-VC group (1.5x–6.3x), indicating that the difference is not driven by a handful of exceptionally popular IPOs, but rather reflects a fundamentally different pricing "norm." Hypothesis 1 is clearly supported. The VC-backed group enters the market at approximately 1.5x–1.8x higher Valuations relative to business scale.
 

In the interest of fairness, however, an important qualification must be noted. Among the most recently listed cohort (109 companies) for which the denominator can be strictly limited to the final full-year actual results prior to listing, the gap in Price-to-Sales Ratio (PSR) persists (5.05x vs. 3.60x), but the difference in pricing per unit of gross profit essentially disappears (Market Cap-to-Gross Profit Multiple: 7.5x vs. 7.5x). The VC-backed group includes a higher proportion of high-gross-margin businesses — exemplified by SaaS companies — and a portion of the Price-to-Sales Ratio (PSR) gap can thus be attributed to differences in the underlying business composition. While it is accurate to say that "VC-backed companies are priced more highly," whether that premium is "unjustifiably high" becomes less clear-cut once gross profit quality is taken into account. This is a topic we intend to explore in greater depth in a separate article, focusing on growth quality and the path to profitability.
 

How Does the Entry Premium Evolve Post-Listing?

What happens over time to the approximately 1.8x pricing gap observed at entry? Tracking the median Price-to-Sales Ratio (PSR) for each group at each fiscal year-end by years elapsed since listing reveals a clear convergence.

The multiple for the VC-backed group compresses progressively year by year, settling to approximately market-level by years 5–6※. This is the underlying explanation for the "disconnect" noted earlier — whereby revenue grows at an annualized rate of +17.7%, yet the Market Capitalization multiple remains at 0.78x. The data suggest that this phenomenon reflects not a deceleration of the underlying business, but rather a normalization process in which the elevated expectations priced in at entry realign with the improving track record.
 

※ Note that the sample composition differs by years elapsed since listing. As longer observation periods are only possible for companies that listed earlier, the number of companies per cohort decreases from 531 at Year 0 to 206 at Year 6. The reversal observed at Year 6 reflects changes in sample composition; however, the convergence trend from Years 0 through 5 is consistent.

VC Ownership Percentage Had Virtually No Impact

A further question arises: within the VC-backed group itself, is there a meaningful difference in post-listing share price performance (Market Capitalization) between companies with higher VC ownership stakes and those with relatively lower VC ownership? The analysis found no statistically meaningful difference in this regard. Specifically, no meaningful divergence was observed between the 78 companies where aggregate VC ownership was 20% or more (median multiple: 0.74x) and the 198 companies where it was below 20% (0.81x). Whether VC investors hold a minority stake or are a major shareholder does not appear to be a decisive factor in determining post-listing Market Capitalization growth.
 

Similarly, with respect to which group produces ten-baggers, no meaningful difference was found. Companies achieving ten-bagger-level growth emerge from both groups. From the VC-backed group: Convano (22.3x), Data Section (19.4x), and BuySell Technologies (17.7x). From the non-VC group: GNI Group (25.0x), MBS (23.8x), and Lib Work (17.8x). The presence or absence of VC backing is neither a necessary condition for, nor an impediment to, exceptional outperformance — this is another conclusion that can be stated clearly based on this analysis. (Note, however, that this analysis considers only Market Capitalization growth multiples, and companies with smaller Market Capitalizations at the time of IPO tend to exhibit higher multiples.)

Conclusion — It Was Not the Business That Ran Out of Steam, but the Entry Expectations

To summarize: the VC-backed group grows revenue faster than the non-VC group (+17.7% vs. +11.2% annualized). The conventional wisdom that "companies rushed to IPO by their VC investors run out of steam after listing" is not supported by the data when assessed on the basis of underlying business growth. On the contrary, the data suggest the opposite: entrepreneurs who accepted VC investment continue to maintain their motivation to grow even after listing — Hypothesis 2 can be considered supported.

So why does the Market Capitalization of the VC-backed group appear to stagnate? The answer lies in the entry point. VC-backed companies come to market at approximately 1.8x higher Valuations relative to their business scale, and this elevated expectation normalizes over the course of approximately five years. The primary driver of Market Capitalization stagnation is not a burnout of the underlying business, but the unwinding of priced-in expectations. Based on the data, the "post-IPO burnout theory" can, for the most part, be characterized as a myth.
 

That said, this should not be interpreted as a blanket endorsement of VC-backed stocks. It is equally true that the elevated entry pricing has acted as a drag on returns for investors who became shareholders post-IPO. For investors, the more pertinent question to ask is not "whether a VC is involved," but rather: "To what extent is future growth already priced in at the current Valuation?" And for entrepreneurs — can they be confident that, as long as revenue growth continues to meet expectations, Valuation will eventually catch up? This is another theme we intend to examine through data. Going forward, we will continue leveraging the database of our dedicated TSE Growth Market analysis platform to shed light on the realities of the Growth Market.
 

Source: Data from the IPO and Growth Market analysis service "Lapis Lazuli" (as of July 2026). Shareholder classifications are based on the Japan Venture Capital Association (JVCA) membership roster and our proprietary classification methodology; "VC" includes CVCs. VC investment status is determined based on the major shareholders listed in IPO disclosure documents at the time of listing; accordingly, VC investments where the investor had already exited prior to the IPO are not captured. IPO valuation multiples are calculated by multiplying the average share price over the six months post-listing (actual closing prices) by the total number of shares issued, and dividing by the most recent full-year actual results closest to the listing date (within ±400 days). Price-to-Sales Ratios (PSR) by years elapsed since listing are based on Market Capitalization at each fiscal year-end, and the sample composition differs by year. Revenue growth rates represent the annualized rate from the earliest full-year actual results covered in our database to the most recent full-year actual results. All figures are based on company disclosure materials and other sources; however, accuracy is not guaranteed.
※ This article is intended for informational purposes only and does not constitute a recommendation to buy or sell any specific securities.