Is Venture Capital Really a Local Business? Evidence from U.S. Cross-Border Investment

Abstract

A collection of specialized pre- and post-investment practices help venture capital firms mitigate the tremendous information and agency problems associated with investment in early-stage startups. However, existing research sheds little light on if, and how, these practices change when investing across borders or the implications for investment performance. This study empirically examines cross-border impact on investment practice and the role local syndicate partners play in that process using a sample of 140,000 rounds of venture capital investment over a 30-year period. Results show little change in U.S. venture capital firm practice when investing across borders, and the addition of a local partner in cross-border deals is negatively associated with investment performance.