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

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Author Info

  • 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

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File URL: http://hdl.handle.net/10.1007/s10843-004-0131-0
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Bibliographic Info

Article provided by Springer in its journal Journal of International Entrepreneurship.

Volume (Year): 2 (2004)
Issue (Month): 4 (December)
Pages: 305-326

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Handle: RePEc:kap:jinten:v:2:y:2004:i:4:p:305-326

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Web page: http://www.springerlink.com/link.asp?id=112039

Related research

Keywords: venture capital; valuation; information; Europe; emerging markets;

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Citations

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Cited by:
  1. Douglas Cumming & Sofia Johan, 2009. "Pre-seed government venture capital funds," Journal of International Entrepreneurship, Springer, vol. 7(1), pages 26-56, March.
  2. 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.
  3. Gavin C. Reid & Julia A. Smith, 2005. "Venture Capital Investor Behaviour in the Backing of UK High Technology Firms: Financial Reporting and the Level of Investment," CRIEFF Discussion Papers 0510, Centre for Research into Industry, Enterprise, Finance and the Firm.
  4. 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.
  5. Mike Wright, 2007. "Venture capital in China: A view from Europe," Asia Pacific Journal of Management, Springer, vol. 24(3), pages 269-281, September.
  6. 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.
  7. 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, vol. 10(1), pages 46 - 68, February.

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