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Venture Capital Performance: The Disparity Between Europe and the United States / Performances du capital risque : Les disparités entre l'Europe et les États-Unis

Author

Listed:
  • Ulrich Hege

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Frédéric Palomino

    (EDHEC - EDHEC Business School - UCL - Université catholique de Lille)

  • Armin Schwienbacher

    (UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

This paper compares the success of venture capital investments in the United States and in Europe by analyzing individual venture-backed companies and the value generated within the stage financing process. We document that US venture capitalists generate significantly more value with their investments than their European counterparts. We find differences in contracting behavior, such as staging frequency and syndication, and evidence that they help to explain the observed performance gap and we report a substantial unexplained residual. We find that US venture funds investing in Europe do not perform better their European peers. European Common Law and Civil Law countries exhibit comparable levels of venture performance, and differences in stock market development or tax subsidies in favor of venture investments are unrelated to performance differences. European IPO exits from venture investments yield returns similar to the US, while trade sale exits weakly underperform. We attribute the overall performance gap essentially to the segment of poorly performing companies.

Suggested Citation

  • Ulrich Hege & Frédéric Palomino & Armin Schwienbacher, 2009. "Venture Capital Performance: The Disparity Between Europe and the United States / Performances du capital risque : Les disparités entre l'Europe et les États-Unis," Post-Print hal-00493173, HAL.
    • Handle: RePEc:hal:journl:hal-00493173
    as

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