I present a model of the venture capital (VC) and public markets in which VCs suffer from capacity constraints, due to the shortage of skilled VC managers. Consequently, VC fi rms can only handle a limited number of new projects at once, having to take ongoing projects public in order to take advantage of new opportunities. This framework is able to match key features presented by the VC and initial public offer (IPO) empirical literatures: (1) VC-backed fi rms are younger, smaller, and less

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... fi table at the IPO than their non-VC backed counterparts; (2) VC-backed IPOs are more underpriced than non-VC backed ones; (3) There is a positive relationship between underpricing and VC fundraising; (4) Small and young VC fi rms usually take portfolio fi rms public earlier than their large and mature counterparts; and (5) In hot IPO markets, VCs are more likely to take public both very young and small fi rms as well as mature and large fi rms, compared to cold markets. Differently, non-VC backed fi rms are usually smaller and younger in hot markets than in cold ones.