A Comparative Overview of Venture Capital in Europe and the United States

Abstract

This paper gives a comparative overview of venture capital in Europe and in the United States. A comparison of aggregated data, which is afflicted with several difficulties, and a comparison of studies using micro data shows a couple of interesting differences and similarities between the European private equity market and the US venture capital market. The two markets are different with respect to the level and specialization of investments. The United States invested more venture capital per capita than Europe. Of each unit invested, Europe spent a larger part in firms' early stages than the United States. The two markets are similar with respect to control mechanisms used, such as incentive-enhancing compensation of fund managers, syndication of investments, and the use of convertible securities albeit the intensities of using these mechanisms differ between the United States and Europe. This paper does not only identify differences and similarities between the two markets but it also discusses several explanations for the existing differences and similarities.