Venture Capital Funding Essay

The determinants of go Capital Funding Performance of US hazard Capital Firms against European VCsProblem StatementOver the cash in ones chips decade, many questioners get down praised the influence of Venture Capital (VC) as a key driver of entrepreneurism, start-ups, inst anyation and economic growth (Da Rin et al., 2006 Cumming, 2014). VC has long been studied and observed in the joined States, it is for these positive reasons that the EU have outlined the development of VC as a major policy priority (EVCA, 2001). It is only within the give out 20 years that the European Market has moved from being perceived as an emerging marketplace in terms of VC, and that even by the start of the 21st Century, the aggregated enthronement volume was 12 billion which was less than 25% of the the Statesn investment volume at that time (Hege et al., 2003 EVCA, 2001). Due to the relatively recent development of VC in Europe, there is a large kerfuffle in the existing research as to the steadfastness and influences of VC in Europe. Certainly Popov & Roosenboom, (2013) bemoan the fact that the majority of existing research into infer not bad(p) typically focuses its attention on the United States. Thus, there is a real shortage of effective empirical studies into the behaviours and qualities of European VC. Jeng and Wells (2000) support this view, explaining that factors such as the contracting, organisation of VC firms, egest decisions, and the peculiarities of Europe atomic number 18 not fully understood, nor has the features that European markets share with American ones have not been made in strong detail. Thus, this dissertation testamenting provide a comparative study into the American VCs and European VCs. This micro-level study result to address the cattle ranch in existing research of the rate of return for VC in the US and the EU, doable the most influential emerging markets for menace financing.Purpose StatementThis research go forth look to e xamine the surgery of US venture cracking firms against European venture capital firms to identify whether a gap exists betwixt the two groups and to determine whether European VCs ca improve the rates of return from total investment establish on funding frequency and other variables. The main objectives of this dissertation areTo determine if there is a gap in the levels of slaying amongst American VC and European VC paying particular attention to the type of exit and rate of return. To explore whether any gap could be the result of major differences in the contractual family between VCs and startups in these regions or from the use of key tools that assert an active role of VCs in the march of value creation. To identify any relevant policy determinants including regional tax, investment protection/treaty, Intellectual attribute rights, and financial regulation. To determine whether US VCs have better screening skills than European VCs and whether this produces a higher deg ree of turning sign investments and funding frequency into successful ventures.Importance of the StudyThis research looks to address the gap in the existing research into the emergence of VC in European markets, and looks to benchmark this against VCs in the United States. Researchers, entropy providers, and trade associations have all observed the notable gap in existing research into VC in Europe (Da Rin et al., 2006 Cumming, 2014). Trade associations have even pointed to this gap in sagaciousness as a main(a) factor that causes them to hesitate with early-stage financing. This dissertation study will excessively be significant as it will look to provide a critical, microeconomic analysis of the main drivers and influence of successful VCs in America and observe these against VCs in Europe, exploring contractual features and firm characteristics to define and quantify the determinants of VC returns. This will look to address the gap in existing research in the European VC sec tor and provide a greater understanding of VCs in Europe.Proposed Research MethodA combination of quantitate and qualitative research tools will be apply to complete this study. Research study will be found using a range of sources, including the creative activity Bank, the Organisation for Economic Co-operation and Developmen (OECD) and other key institutions with data on several policy factors. These data sources will provide information on an expansive range of portfolio organizations, key investments and ratings. Quantitative data analysis will be completed using the statistical package software SPSS. The statistical package software benefits the killing and transformation of the data. Following the completion of the data collection stage, the researcher will analyse the raw data and assemble the results into a data matrix. This data matrix with contain the details of the study with key information sorted into columns, variable and values. The data matrix will then be app ly for statistical calculations and used for the analysis of the results. This dataset will allows the researcher to study organisations performance in terms of inside Rate of Return (IRR) of the investment amongst the initial investment to the final value of the firm. This study will also aim to quantify the influence of VCs on project profitability in Europe and compare this to the United states. A valuation-based measure of the rate of return will be used to examine the characteristics of European VCs against US VCs. independent variables to be studied will include age (the time elapsed since the VC raised the premier(prenominal) fund), Regional (does the VC only invest in their own country), Companies (the number of companies in the VCs portfolio), Duration (the average investment duration in years), and, finally, the taxation policies of the US and Europe. The following equation will be used to shoot for estimated values (V1) for the first stage valuation for all European organizations Qi = V1i=I1i.Here Qi represents the initial value for company, whereas i is the multiple of the initial investment. The average Qj ratio will be determined of all selected studies.Research HypothesesThe research will also use the following hypothesesHypothesis 1 European VCs performance is positively correlated with the rate of return of the investment between the initial investment and the final valuation of the project/firm. Hypothesis 2 outgrowthd continuity of VCs engenders a stronger relationship which reduces barriers to financing and will increase returns. Hypothesis 3 European Venture-backed companies could benefit from the presence of alternative investments besides independent VCs. ReferencesBlack, B. S., Gilson, R. J. (1998) Venture capital and the structure of capital markets banks versus stock markets, Journal of Financial Economics, 47, pp. 243-277.Cumming, D. (2014) Public economics gone wild Lessons from venture capital, International Review of Financi al Analysis, 36, pp. 251-260.Da Rin, M., Nicodano, G., Sembenelli, A. (2006) Public Policy and the reaction of active venture capital markets, in Journal of Public Economics, 90, pp. 1699-1723.EVCA (2001) A Survey of Private Equity and Venture Capital in Europe, Yearbook 2001Green, J. (2004) Venture capital at a new crossroads, Journal of Management Development, 23(10), pp. 972 976.Hege, U., Palomino, F., Schwienbacher, A. (2003) Determinants of Venture Capital Performance Europe and the United States, LSE Working Paper, 1, pp. 1-40.Jeng, L. A., Wells, P. C. (2000) The determinants of venture capital funding evidence crossways countries, Journal of Corporate Finance, 6, pp. 241-289.Popov, A., Roosenboom, P. (2013) Venture Capital and New Business Creation, Journal of Banking & Finance, 37, pp. 4695-4710.