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A Study of Private Equity Rounds of Entrepreneurial Finance in EU: Are Buyout Funds Uninvited Guests for Startup Ecosystems?

Author

Listed:
  • Hiroyuki Miyamoto

    (Department of Innovation Science, Tokyo Institute of Technology, Tokyo 105-0023, Japan)

  • Cristian Mejia

    (Department of Innovation Science, Tokyo Institute of Technology, Tokyo 105-0023, Japan)

  • Yuya Kajikawa

    (Department of Innovation Science, Tokyo Institute of Technology, Tokyo 105-0023, Japan)

Abstract

This paper studies the difference between startup investments by private equity funds (buyout funds; PE) and venture capital funds (VC). PEs, which have traditionally invested in mature companies, have been increasingly investing in later-stage startups in recent years. Based on Crunchbase’s data on EU startup investments from 2011 to the first half of 2021, we find that: (1) later-stage VC-backed startups and PE-backed startups differ in terms of the industry domain, (2) PE-backed startups tend to have higher revenue when they receive investments, and (3) VC-backed startups are more likely to exit via Initial Public Offering (IPO) and slightly less likely to exit via Mergers and Acquisitions (M&A) than PE-backed startups. These results connect previous studies on VC and PE and deepen our understanding of later-stage startup investment. It also suggests that PE invests differently than VCs and provides new added value to the startup ecosystem. In addition, it adds insights into corporate behavior in new business domain expansion.

Suggested Citation

  • Hiroyuki Miyamoto & Cristian Mejia & Yuya Kajikawa, 2022. "A Study of Private Equity Rounds of Entrepreneurial Finance in EU: Are Buyout Funds Uninvited Guests for Startup Ecosystems?," JRFM, MDPI, vol. 15(6), pages 1-16, May.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:6:p:236-:d:824489
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    References listed on IDEAS

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    2. Cumming, Douglas & Siegel, Donald S. & Wright, Mike, 2007. "Private equity, leveraged buyouts and governance," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 439-460, September.
    3. Steven N. Kaplan & Per Stromberg, 2009. "Leveraged Buyouts and Private Equity," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 121-146, Winter.
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