We examine the challenge entrepreneurial companies face in going beyond the start-up phase and growing into large successful companies. We examine the long-term financing of these so-called scale-up companies, focusing on the United States, Europe and Canada. We first provide a conceptual framework for understanding the challenges of financing scale-ups. We then show some data about the various aspects of financing scale-ups in the US, Europe and Canada. Finally we raise the question of long-term public policies to support the creation of a better scale-up environment.

(1) Background: Cross-border venture capital (VC) investments play an important role in the scaling up of high-growth companies. However, policymakers worry that foreign VC investments transfer the majority of economic activity to the investor country. On the one hand, start-ups welcome the foreign capital, expertise, and networks that accompany cross-border investments. On the other hand, policymakers are concerned that cross-border investments predominantly benefit foreign economies and fail to develop the local entrepreneurial ecosystem. This paper describes a framework for how policymakers can develop a set of policies toward cross-border VC investments. (2) Methods: The paper examines available data and trends about the role of cross-border investing, focusing on Europe, Israel, and Canada. Then, the paper explains the underlying economic challenges and develops a policy framework. (3) Results: The analysis shows that in addition to policies that aim to attract foreign investors, there are also important policies for the development of the domestic VC market. The analysis encompasses policies that are both financial and non-financial in nature. (4) Conclusions: A core insight for policymakers is to retain a balance of initiatives, attracting foreign investors while simultaneously making sure to strengthen the country’s domestic VC industry and innovation ecosystem. The mix of policies will adjust as the domestic ecosystem matures.

No abstract

This chapter examines the challenge for entrepreneurial companies of going beyond the start-up phase and growing into large successful companies. We examine the long-term financing of these so-called scale-up companies, focusing on the United States, Europe, and Canada. The chapter first provides a conceptual framework for understanding the challenges of financing scale-ups. It emphasizes the need for investors with deep pockets, for smart money, for investor networks, and for patient money. It then shows some data about the various aspects of financing scale-ups in the United States, Europe, and Canada, showing how Europe and Canada are lagging behind the US relatively more at the scale-up than the start-up stage. Finally, the chapter raises the question of long-term public policies for supporting the creation of a better scale-up environment.

1) Background: Cross-border venture capital (VC) investments play an important role in the scaling up of high-growth companies. However, policymakers worry that foreign VC investments transfer the majority of economic activity to the investor country. On the one hand, start-ups welcome the foreign capital, expertise, and networks that accompany cross-border investments. On the other hand, policymakers are concerned that cross-border investments predominantly benefit foreign economies and fail to develop the local entrepreneurial ecosystem. This paper describes a framework for how policymakers can develop a set of policies toward cross-border VC investments.(2) Methods: The paper examines available data and trends about the role of cross-border investing, focusing on Europe, Israel, and Canada. Then, the paper explains the underlying economic challenges and develops a policy framework.(3) Results: The analysis shows that in addition to policies that aim to attract foreign investors, there are also important policies for the development of the domestic VC market. The analysis encompasses policies that are both financial and non-financial in nature. (4) Conclusions: A core insight for policymakers is to retain a balance of initiatives, attracting foreign investors while simultaneously making sure to strengthen the country's domestic VC industry and innovation ecosystem. The mix of policies will adjust as the domestic ecosystem matures. and Canada, policymakers have actively encouraged foreign investments, while others, including many European countries, implicitly discourage cross-border financing, or simply lack a clear set of policy guidelines. In this paper, we propose a coherent perspective to assess the advantages and disadvantages of cross-border VC investments. We outline the challenges faced by companies, investors, and policymakers, and present a framework for drafting appropriate policy responses.This study builds on a review of the academic literature (see Devigne et al. 2018), as well as a summary of publicly available data, to develop a new framework analysing policy options for cross-border venture investing. Section 2 looks at the quantitative and qualitative data about the rise of cross-border investing. Section 3 develops a conceptual understanding of the economic challenges of cross-border investing. Section 4 develops the main policy analysis. It is followed by a brief conclusion. Trends in Cross-Border Venture Capital InvestmentsThis section outlines what we currently know about cross-border investments. Cross-border VC investment is defined as investments from investors located in a different country from the country where the portfolio company was founded. In our discussion, we mainly talk about VC, but one can use a broad definition of this term. Although not our focus and thus excluded from our data, much of our analysis also pertains to other forms of early-stage financing, such as angel investing, corporate venturing, or crowdfunding. In general, cross-border VC investments make up a non-tr...