The Impact of Multinational Venture Capital on the Startups’ Performance: Insights From Europe

Venture capital (VC) investment plays a crucial role in the functioning of firms and the overall economy, and its significance has been increasing, with global VC funds reaching new highs in 2023. This study focuses on a sample of European entrepreneurial firms that received at least one VC investment between 1998 and 2015 and examines the impact of multinational VC (MVC) on startups' performance. To ensure a high level of research rigor and the reliability of the results, we address potential selection bias and endogeneity issues by employing the Heckman two-step method and the 2SLS method, with migrant stock serving as the instrumental variable. Our findings reveal that MVC significantly reduces startups' sales and return on assets (ROA), particularly in Northern and Central Europe and across both growth and decline periods. Through multiple robustness checks—including alternative model specifications, variable substitutions, and outlier control—we confirm the robustness and reliability of our results. Our findings suggest that startups fare better by seeking VC investment from a single nation.