Research Paper 21: State-sponsored venture capital investments and firm performance: The role of networks
In this paper, we analyzed how different types of venture capital investments - private, public and indirect public - affect the performance of portfolio companies. For the analysis, we used data from more than 20,000 VC deals in Europe between the years 2000 and 2018 and created a unique dataset on the institutional environment (public/indirect/private) of almost 5000 investors.
It turns out that public VC investors consistently underperform purely private investors, while indirect public investments (such as the "Juncker Plan" or InvestEU investments) consistently perform better. We link these results to the fact that public funds are not among the best performing investor groups.
On the other hand, indirect funds invest in the VC funds with the best network characteristics, which raises the question of whether indirect VC investments are associated with a high degree of deadweight loss and do not necessarily improve the value creation of VC funds. We confirm the main conclusions by using instrumental variable specifications.
