The European venture capital landscape: an EIF perspective. Volume V: The economic impact of VC investments supported by the EIF (European Investment Fund)

Summary

• The study evaluates the causal effect of EIF-supported venture capital investments on 782 early stage start-ups supported between 2007 and 2014 relative to a matched control group.p.6
• EIF-backed start-ups are one to two times more capitalised than control start-ups in the first five years following investment.p.6
• VC-backed start-ups achieve turnover levels that are 19 % to 97 % higher than non-VC-backed counterfactuals from one to five years post-treatment.p.7
• Employment levels measured by cost of labour are about 100% higher in treated start-ups compared to non-VC-backed firms.p.7
• During the investment year, average capital levels for EIF-supported start-ups stand at 147 % of the level observed in non-VC-backed firms.p.28

Key insights

1. EIF-supported venture capital investments enable start-ups to prioritise long-term scaling while trading off short- to medium-term profitability.p.5
2. EIF-backed start-ups grow approximately two times larger in total assets compared to their counterfactuals within five years post-investment.p.6
3. Venture capital financing facilitates access to debt-type financing in the medium run despite start-ups holding relatively lower shares of tangible collateral.p.7
4. There is no evidence of cost inefficiencies introduced by VC financing, as higher short-term financial losses reflect deliberate growth trade-offs.p.7
5. Start-ups located in the UK and Ireland as well as France and Benelux experience higher post-investment growth compared to other European macro-regions.p.7
6. European VC market accessibility was modelled using network theory based on flight route connections between Functional Urban Areas.p.11