Do Investors Manage US Ventures Less Intensively than Ventures in Other Regions of the World?

Abstract

We examine differences in the risk-mitigation practices of venture-capital investors in managing both US and non-US ventures. The analysis focuses on actions taken by investors to manage the risks in venture firms. In particular, we evaluate whether investors disburse an average dollar to non-US ventures through more rounds, a shorter elapsed time between rounds, and broader syndication than to US ventures. After controlling for exogenous characteristics such as the industry affiliations of the ventures, the evidence is consistent with the finding that US ventures are not less risky than ventures from other parts of the world. Investors do not disburse funds to non-US ventures in more rounds, require less elapsed time between rounds, or syndicate more broadly than for US ventures. This may occur because investors select relatively higher quality ventures outside the US than in the US. The conclusions emphasize that the venture community has not developed fully in its understanding of international investing.

Keywords: Venture capital