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Venture Capital Investors, Capital Markets, Valuation and Information: US, Europe and Asia

Author

Listed:
  • Mike Wright
  • Andy Lockett
  • Sarika Pruthi
  • Sophie Manigart
  • Harry Sapienza
  • Philippe Desbrieres
  • Ulrich Hommel

Abstract

This paper uses a large multi-country sample of venture capital firms to compare the approaches to investee valuation and sources of information used by venture capital investors in English, French and German legal systems as well as geographical regions. Different legal systems are significantly associated with the valuation mechanism used. In particular, compared to English-based Common Law systems, VC firms operating in a Germanic legal system are significantly more likely to use DCF based measures and significantly less likely to use PE comparators. This latter result is also the case for VC firms operating in a French legal system who are also significantly more likely to adopt historic cost valuation methods. VC firms in Europe and Asia are significantly less likely than US VC firms to make use of liquidation value methods but significantly more likely to use PE comparators. European firms are significantly less likely to adopt DCF methods compared to US VC firms. VC firms operating under a Germanic legal system are less likely to utilise information from the financial press but significantly more likely to use interviews with entrepreneurs. VC firms operating under a French legal system are more likely to utilise interviews with company personnel as well as sales and marketing information. VC firms in Europe and Asia are significantly more likely than US VC firms to use financial press. VC firms in Asia are significantly less likely to make use of interviews with entrepreneurs or business plan data. VC firms in Europe are significantly more likely to utilise sales and marketing information. Copyright Springer Science+Business Media, Inc. 2004

Suggested Citation

  • Mike Wright & Andy Lockett & Sarika Pruthi & Sophie Manigart & Harry Sapienza & Philippe Desbrieres & Ulrich Hommel, 2004. "Venture Capital Investors, Capital Markets, Valuation and Information: US, Europe and Asia," Journal of International Entrepreneurship, Springer, vol. 2(4), pages 305-326, December.
    • Handle: RePEc:kap:jinten:v:2:y:2004:i:4:p:305-326
    DOI: 10.1007/s10843-004-0131-0
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    Citations

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    Cited by:

    1. Jan Smolarski & Neil Wilner & Weifang Yang, 2011. "The use of financial information by private equity funds in evaluating new investments," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 10(1), pages 46-68, February.
    2. Krzysztof Dziekoñski & S³awomir Ignatiuk, 2016. "Venture capital and private equity investment preferences in selected countries," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 11(3), pages 128-137, February.
    3. Andreas Köhn, 2018. "The determinants of startup valuation in the venture capital context: a systematic review and avenues for future research," Management Review Quarterly, Springer, vol. 68(1), pages 3-36, February.
    4. Carolin Bock & Christian Hackober, 2020. "Unicorns—what drives multibillion-dollar valuations?," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 949-984, November.
    5. Douglas Cumming & Sofia Johan, 2009. "Pre-seed government venture capital funds," Journal of International Entrepreneurship, Springer, vol. 7(1), pages 26-56, March.
    6. David Ahlstrom & Garry Bruton & Kuang Yeh, 2007. "Venture capital in China: Past, present, and future," Asia Pacific Journal of Management, Springer, vol. 24(3), pages 247-268, September.
    7. Aurélie Sannajust & Alexander Groh, 2023. "Pioneering management buy-out and entrepreneurial finance research: Mike Wright’s research legacy," Small Business Economics, Springer, vol. 60(1), pages 1-35, January.
    8. Jones, Marian V. & Coviello, Nicole & Tang, Yee Kwan, 2011. "International Entrepreneurship research (1989–2009): A domain ontology and thematic analysis," Journal of Business Venturing, Elsevier, vol. 26(6), pages 632-659.
    9. Douglas Cumming & Grant Fleming & Armin Schwienbacher, 2009. "Corporate Relocation in Venture Capital Finance," Entrepreneurship Theory and Practice, , vol. 33(5), pages 1121-1155, September.
    10. Elisabeth S.C. Berger & Andreas Köhn, 2020. "Exploring the differences in early-stage start-up valuation across countries: an institutional perspective," International Entrepreneurship and Management Journal, Springer, vol. 16(1), pages 327-344, March.
    11. Cumming, Douglas & Zhang, Yelin, 2016. "Alternative investments in emerging markets: A review and new trends," Emerging Markets Review, Elsevier, vol. 29(C), pages 1-23.
    12. Douglas Fuller, 2010. "How law, politics and transnational networks affect technology entrepreneurship: Explaining divergent venture capital investing strategies in China," Asia Pacific Journal of Management, Springer, vol. 27(3), pages 445-459, September.

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