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Connectedness of entrepreneurial ecosystems: the impact of VC financing mobility on startup valuations

Author

Listed:
  • Peter Wirtz

    (Emlyon Business School)

  • Max Berre

    (Università degli Studi di Milano-Bicocca)

Abstract

National venture capitalist (VC) ecosystems are not isolated from each other, and foreign VC species may cross borders when pursuing valuable investment opportunities. The present research demonstrates that VC investments inside or outside VCs’ domestic ecosystems play a significant role in the target ventures’ valuation. VCs trade off familiarity of their domestic ecosystem for valuation. Our results indicate that familiarity with the domestic ecosystem reduces risk, and purely domestic deals consequently carry significantly positive valuation premia. Cross-border deals, on the other hand, have a significantly negative impact on valuation. However, certain comparative ecosystem characteristics, such as institutional shareholder protections and an ecosystem’s comparative competitive advantage, as well as an ecosystem’s relative saturation in terms of money on the market, partially offset the observed cross-border valuation penalty.

Suggested Citation

  • Peter Wirtz & Max Berre, 2025. "Connectedness of entrepreneurial ecosystems: the impact of VC financing mobility on startup valuations," Small Business Economics, Springer, vol. 65(3), pages 1301-1325, October.
    • Handle: RePEc:kap:sbusec:v:65:y:2025:i:3:d:10.1007_s11187-025-01021-6
    DOI: 10.1007/s11187-025-01021-6
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    Keywords

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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