Venture Capital Performance
A Comparative Study of Investment Practices in Europe and the USA
European venture capital (VC) funds have historically underperformed their US counterparts. This has resulted in reduced investment into European VC by the traditional institutional investors. This book investigates the factors that give rise to the performance difference. It is based on the author’s research at the Adam Smith Business School, University of Glasgow which involved a qualitative study of some 64 VC firms in the UK, continental Europe and the US, supplemented by 40 interviews with other stakeholders, including limited partner investors, corporate venturers, entrepreneurs and advisors.
Readers will gain an in-depth understanding of the various structural, operational and wider environmental factors that impact on the performance difference between UK/European and US VC funds. The study is unique in that it provides, for the first time, a holistic and extensive analysis of the entire investment process from sourcing deals to exiting deals specifically contrasting Europe and the US in terms of the variables pertaining to the investment process and the impact on the fund performance. Factors impacting on the performance differential are structural, resulting from characteristics of the funds themselves, operational such as the investment practices of the VC firms which manage the funds and environmental such as culture and attitude to risk and the wider ecosystem in which the funds operate. These factors are set out clearly for the reader. The characteristics of the better performing funds in Europe and the US are also investigated.
The book is aimed at academics who are researching venture capital fund performance and investment practices and also at practitioners, advisors and policymakers who want to learn about best VC investment practices. Whilst the book is focused on European and US VC investing, the best practices are also pertinent for VC firms and funds setting up in other geographies, particularly in emerging markets. To this end, best practice guidelines based on the research are included.
Table of Contents
2. The European / US gap in venture capital fund performance
3. The factors that impact on venture capital fund performance
4. Theoretical considerations
5. Research aims and methodology
6. Structural differences
7. Operational differences
8. Wider environmental differences
9. Characteristics of firms with better performing funds
10. Summary and conclusions
Keith Arundale, PhD, is a university lecturer, executive trainer and consultant in private equity and venture capital. He is a Senior Visiting Fellow at the ICMA Centre, Henley Business School, University of Reading. His PhD from the Adam Smith Business School, University of Glasgow, explores the reasons for the historical difference in performance between European and US VC funds with a focus on VC investment practices. Previously, Keith was with PwC, leading the VC programme and marketing for PwC’s Global Technology Industry Group in Europe. He lives in Windsor, UK, with his wife Kathy.