Venture Capital Performance: The Disparity Between Europe and the United States

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 …nancing process. We document,that US venture,capitalists generate signi…cantly more value with their investments,than their European,counterparts. We …nd di¤erences 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 …nd 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 di¤erences in stock market,development,or tax subsidies in favor of venture,investments,are unrelated,to performance,di¤erences. 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. Keywords: venture capital performance, …nancial development, stage …nancing, exit, moni-