VICO

"Financing Entrepreneurial Ventures in Europe : Impact on innovation, employment growth, and competitiveness"

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 Obiettivo del progetto (Objective)

'The aim of the VICO project is to assess the impact of Venture Capital and Private Equity (VC/PE) financing on the economic performance of European innovative entrepreneurial ventures as they are reflected by their innovation output, employment, growth, and competitiveness, and the role VC/PE investors play in helping these firms bridge their resource and competence gap beyond the provision of financing. Particular attention will be devoted to the institutional variety of VC/PE investors in Europe. We will consider factors affecting both the demand for and the supply of VC/PE financing, at micro and macro level. In particular, we will analyze how the effects of VC/PE financing on the economic performance of portfolio companies are moderated by i) the characteristics of the investor, ii) the characteristics of invested firms, and iii) the characteristics of the business and institutional environment in which firms operate. In addition, we will examine specific open issues that play a crucial role for the development of the VC/PE sector in Europe, namely: i) the design of a mix of multi-level policy schemes targeting seed and pre-seed capital; ii) exit mechanisms for VC/PE investors; and iii) the European integration of the VC/PE sector and the internationalization of VC/PE investors. The project will benefit from a unique combination of qualitative (survey analyses and case studies) and quantitative empirical methodologies. As to these latter, the project will build and use a micro&macro cross-country panel type dataset with a rather long longitudinal dimension and wide coverage of EU countries so as to overcome some of the key weaknesses of the extant empirical literature. The consortium is a blend of well known scientists from different disciplines (i.e. finance, innovation economics, entrepreneurship, management, policy science). Several of them have already collaborated in EU promoted research projects (such as the VCFUN project promoted by the PRIME NoE).'

Introduzione (Teaser)

New studies have identified how successful venture capital (VC) is in revitalising start-ups and supporting business. This will lead to a much better understanding of how to enhance financing mechanisms and create appropriate policies.

Descrizione progetto (Article)

Financial investment such as VC has been behind the success of numerous high-potential, start-up companies and has spurred growth across the world. The EU has seen its fair share of successes under this model and has strived to identify the exact impact of VC financing on the performance of innovative, enterprising ventures. This was the mandate of the EU-funded VICO project.

The project conducted cross-border studies on innovation and financial support, examining VC demand and supply in the market and adopting an integrated approach between macroeconomic and microeconomic analyses. It also worked on promoting innovative entrepreneurial business initiatives and start-ups, honing their ability to attract investors. A key project achievement involved investigating the diversity or heterogeneity of VC investors on the performance of the portfolio firms.

VICO also studied how VC investors selected their firms and improved these firms' performance, revealing investors do indeed boost a company's productivity and growth, even during times of financial crisis. The project clearly showed that the impact of VC investors was significantly higher than previously documented, with success depending more on investors' guidance rather than on selection of firms.

Another important finding was that government investments in firms younger than five years of age were more successful than older firms. That said, the age of a firm played a negligible role where university VCs were concerned. On another front, much of the successful investment portfolio depended on cross-border VC initiatives, pointing out a useful and valuable trend in the EU.

Several key policy recommendations have emerged from the project, such as fostering more entrepreneurial risk-taking, creating a VC-friendly tax environment, and establishing liquid markets. On the micro level, the project recommended provision of selected subsidies on a competitive basis and promotion of support services such as business incubators. These and numerous other findings can considerably help shape investment types and decisions in the future, encouraging innovation and influencing economic growth in unprecedented ways.