Key Takeaways
- • A multi-university European research study of 611 venture capital managers across 396 companies found that US and European VC performance metrics are nearly identical, contradicting conventional wisdom that US venture capital significantly outperforms European counterparts.
- • The US venture capital market remains approximately five times larger than Europe's, with the surveyed firms representing 55% of European market capitalization and €130 billion under management.
- • Performance parity extends across multiple dimensions: both regions target similar returns, face equivalent failure rates, and achieve comparable high-level results, according to the study conducted by seven European business schools including Polimi, IE Business School, and Stockholm School of Economics.
- • Institutional and legal contexts create meaningful operational differences between the two ecosystems—particularly around contracting frameworks—yet these divergences do not translate into material performance disparities at the fund level.
Summary
A collaborative research initiative spanning seven leading European business schools has produced findings that challenge the prevailing assumption of US venture capital superiority. The study, titled "Practices of European and American Venture Capitalists: homogeneity and heterogeneity at work," surveyed 611 managers from 396 companies representing 55% of European VC market capitalization and €130 billion under management. Led by Massimo Colombo, professor of Innovation Economics, Entrepreneurship and Entrepreneurial Finance at Polimi School of Management, the research provides quantitative evidence that contradicts long-standing performance comparisons favoring the US market.
The data reveals that performance metrics between the two regions are nearly identical. Both US and European venture capital managers target similar investment returns, encounter comparable failure rates, and achieve equivalent high-level results. This parity holds despite substantial structural differences in market size: the US venture capital market is approximately five times larger than Europe's, a scale differential that has historically been interpreted as evidence of superior performance or efficiency in the American model. The study's findings suggest that size advantage does not necessarily correlate with proportionally better returns or risk-adjusted outcomes.
While performance converges, operational approaches diverge significantly. The European venture capital model emphasizes people-centric strategies and relationship-focused investment practices, differing from the US approach. Additionally, institutional contexts—particularly legal and contractual frameworks—create distinct operational challenges. European corporate law structures make it difficult or costly to transplant US venture capital contracting practices directly into European jurisdictions, forcing investors to develop alternative arrangements. However, these methodological and structural differences appear to function as functional equivalents rather than sources of competitive disadvantage.
The US venture capital model itself, established in 1946, was adopted by European markets beginning in the 1970s, creating a historical foundation of institutional borrowing rather than entirely independent development. This inheritance partially explains operational similarities despite evolved regional preferences. The research underscores that divergent approaches to venture capital management—shaped by local legal systems, cultural preferences, and institutional constraints—need not produce performance gaps, a critical insight for institutional investors evaluating geographic diversification within venture portfolios.
The data reveals that performance metrics between the two regions are nearly identical. Both US and European venture capital managers target similar investment returns, encounter comparable failure rates, and achieve equivalent high-level results. This parity holds despite substantial structural differences in market size: the US venture capital market is approximately five times larger than Europe's, a scale differential that has historically been interpreted as evidence of superior performance or efficiency in the American model. The study's findings suggest that size advantage does not necessarily correlate with proportionally better returns or risk-adjusted outcomes.
While performance converges, operational approaches diverge significantly. The European venture capital model emphasizes people-centric strategies and relationship-focused investment practices, differing from the US approach. Additionally, institutional contexts—particularly legal and contractual frameworks—create distinct operational challenges. European corporate law structures make it difficult or costly to transplant US venture capital contracting practices directly into European jurisdictions, forcing investors to develop alternative arrangements. However, these methodological and structural differences appear to function as functional equivalents rather than sources of competitive disadvantage.
The US venture capital model itself, established in 1946, was adopted by European markets beginning in the 1970s, creating a historical foundation of institutional borrowing rather than entirely independent development. This inheritance partially explains operational similarities despite evolved regional preferences. The research underscores that divergent approaches to venture capital management—shaped by local legal systems, cultural preferences, and institutional constraints—need not produce performance gaps, a critical insight for institutional investors evaluating geographic diversification within venture portfolios.
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