Venture Capital Funding Essay

The determinants of surmise hood Funding Performance of US enter Capital Firms against European VCsProblem StatementOver the last decade, many lookers have praised the exploit of Venture Capital (VC) as a key driver of entrepreneurism, galvanise-ups, insertion and economic growth (Da Rin et al., 2006 Cumming, 2014). VC has long been examine and observed in the linked 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 last 20 years that the European Market has moved from being perceived as an emerging market in terms of VC, and that even by the start of the 21st Century, the aggregated enthronement volume was 12 billion which was little than 25% of the American investment volume at that time (Hege et al., 2003 EVCA, 2001). referable to the relatively recent development of VC in Europe, there is a great(p) flutter in the spry look for as to the effectiveness and influen ces of VC in Europe. Certainly Popov & Roosenboom, (2013) bemoan the fact that the majority of existing research into surmise big(p) typically focuses its guardianship 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) run this view, explaining that factors such as the contracting, organisation of VC firms, exit decisions, and the peculiarities of Europe are non fully understood, nor has the features that European markets share with American ones have not been do in strong detail. Thus, this dissertation will bequeath a proportional study into the American VCs and European VCs. This micro-level study will to address the crack cocaine in existing research of the rate of fall in for VC in the US and the EU, possible the most influential emerging markets for make believe financing.Purpose StatementThis research will look to examine the performance of US venture capital fi rms against European venture capital firms to identify whether a time out exists betwixt the two groups and to determine whether European VCs ca improve the rates of return from total investment based on funding frequency and other(a) variables. The chief(prenominal) objectives of this dissertation areTo determine if there is a cattle farm in the levels of performance 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 relationship among VCs and startups in these regions or from the use of key tools that assert an active role of VCs in the process of value creation. To identify any relevant policy determinants including regional tax, investment protection/treaty, Intellectual property rights, and financial regulation. To determine whether US VCs have better screening skills than European VCs and whether this produces a higher ground level o f turning initial investments and funding frequency into successful ventures.Importance of the write upThis research looks to address the gap in the existing research into the result of VC in European markets, and looks to benchmark this against VCs in the United States. Researchers, info providers, and pile 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 understanding as a primary factor that causes them to flicker with early-stage financing. This dissertation study will also be significant as it will look to provide a critical, microeconomic psycho 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 limit the determinants of VC returns. This will look to address the gap in existing research in the European VC sector and provide a greater understanding of VCs in Europe.Proposed Research MethodA combination of quantitate and qualitative research tools will be used to ace this study. Research data will be found using a range of sources, including the World 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 education on an expansive range of portfolio organizations, key investments and valuations. Quantitative data analysis will be completed using the statistical package parcel SPSS. The statistical package software benefits the cleaning and transformation of the data. Following the issue of the data collection stage, the researcher will analyse the raw data and assemble the results into a data hyaloplasm. This data matrix with contain the expound of the study with key information sorted into columns, variable and determine. The data matrix will then be used for statistical calcul ations and used for the analysis of the results. This dataset will allows the researcher to study organisations performance in terms of Internal 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 discriminate 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 counterbalance fund), Regional (does the VC only invest in their own country), Companies (the number of companies in the VCs portfolio), Duration (the fair investment duration in years), and, finally, the taxation policies of the US and Europe. The following equation will be used to calculate 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 growingd 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 as well as 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, global Review of Financial 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 accompany of Private Equity and Venture Capital in Europe, Yearbook 2001Green, J. (2004) Venture capital at a new crossroads, Journal of steering 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 across 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.