(Core Source: "Dow Jones VentureSource": Global Venture Capital Research Database)
British Venture Capital Association Chairman 2011/12:
so we welcome this research by Ulf Axelson and Milan Martinovic both of the London School of Economics because it challenges three key myths of venture capital performance in Europe – that the likelihood of a successful VC exit is lower in Europe than in the US; that some vaguely understood determinants of success are tilted in favour of the US and against Europe; and that there is a chronic stigma around failure which harms European entrepreneurs.
We examine the determinants of successful exits in European venture capital transactions and compare them to US transactions. Using survival analysis, we show that for both regions the probability of exit via an initial public offering (IPO) has gone down significantly over the last decade, while the time to IPO has gone up – in contrast, the probability of exit via trade sales and the average time to trade sales do not change much over time. Contrary to perceived wisdom, there is no difference in the success rates of European and US deals from the same vintage year with respect to IPO exits, while Europe has about an eight percentage point lower probability of exit via trade sales than the US. Venture success has the same determinants in both Europe and US, with more experienced entrepreneurs and venture capitalists being associated with higher probabilities of exit. The fact that repeat or ‘serial’ entrepreneurs are less common in Europe and that European VCs lag US VCs in terms of experience explains the remaining difference in performance. Finally, and contrary to perceived wisdom, we find no evidence of a stigma of failure for entrepreneurs in Europe.