VC Value-Adding Activities and Cross-Border Funding: A study of priorities, performance, and attitudes

Abstract

The aim of this study was to map the venture capital landscape in terms of portfolio companies' and different types of VC firm’s attitude to foreign VC funding, and to extend the literature on value-adding activities by introducing a new category of support activities specifically aimed at attracting foreign VC. Additionally we intended to shed light on investor portals, a recent technological trend in information asymmetry mitigation between VC, foreign and local, and their current and prospective portfolio companies. The study built on two questionnaires to collect a fresh and unique set of data from 155 portfolio companies and 32 venture capital firms from 13 European countries. We find a distinctly positive attitude to foreign VC investors both in portfolio companies and all types of venture capital firms. Our results also indicate that portfolio companies have positive experiences with foreign VC investors in that they are more welcoming of it after having received it. Furthermore, we find indicative evidence that venture capital firms have improved in regard to value adding support performance in the last decade or so. We also find a strong indication that foreign lead VCs outperform lead domestic VCs on some, but not most, support activities. Lastly, we provide fresh statistics on the application and perceptions of investor portals as a mitigating mechanism for information asymmetries. All findings are reviewed in terms of their limitations and implications for further research.