We examine the determinants of success in venture capital transactions using the largest deallevel data set to date, with special emphasis on comparing European to US transactions. Using survival analysis, we show that for both regions the probability of exit via 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 likelihood or profitability of IPOs between European and US deals from the same vintage year. However, European trade sales are less likely and less profitable than US trade sales. Venture success has the same determinants in both Europe and US, with more experienced entrepreneurs and venture capitalists being associated with higher success. The fact that repeat or „serial‟ entrepreneurs are less common in Europe and that European VCs lag US VCs in terms of experience completely explains any difference in performance between Europe and the US. Also, contrary to perceived wisdom, we find no evidence of a stigma of failure for entrepreneurs in Europe.
Financial Markets Group Discussion Papers DP 753