Growth of High-Tech Start-ups in Europe: Evidence on the Role of Venture Capital

Venture Capital (VC) funding plays an important role in the scaling-up process of high-tech startups by alleviating financial constraints, providing know-how and access to international networks. This project will document several novel patterns related to VC funding of high-tech start-ups in the EU. The first part of the project will provide a systematic review of the existing empirical studies on the effects of VC funding on startups' performance in the EU and the heterogeneity of these effects by characteristics of the startup and investor. Differences in the effects across countries and between national and foreign investors will be an important focus of the review. The review will also estimate the average effect of VC on EU startups using a meta-analysis model. The second part of the project will provide an econometric analysis of the factors that affect the ability of startups to attract VC funding and the effects of the VC funding. In addition to frequently used firm performance measures, it will estimate the effects on firm’s online presence and the ability to attract additional rounds of funding. It will also examine how these effects vary across regions/countries and between domestic and foreign investors. The project will use counterfactual evaluation methodologies and a combination of novel datasets, including CrunchBase database, which is a comprehensive new firm level database on innovative startups, Amadeus dataset, which provides data of firm financial performance, and data from online media related to startups and VC funding. The analysis of online and social media coverage of startups will be performed by a machine learning model.