Newswise — ITHACA, N.Y. – Very few venture-backed startups move from their original location to a new country, but those that do benefit financially, according to new research.

Startups that moved internationally raised an average of $60 million, compared with $20 million raised by stationary companies, and they averaged 17% more investors. Their chances of a successful exit – launching an initial public offering, undergoing a merger or being acquired by another company, all of which allow their founders and investors to cash in – were 67% higher. 

Plus, startups that migrated reached billion-dollar valuations at a rate 3.5 times higher than those that didn’t. And, among all billion-dollar “unicorns” in the study, those that moved internationally had a median valuation 40% higher.

“Despite the significant challenges and low observed frequency of international relocation, startups that moved internationally reap substantial benefits,” said Yuan Shi, an author of the study and assistant professor of management and organizations in Cornell University’s SC Johnson College of Business.

Shi and his co-authors discovered these patterns by building and analyzing a sample of 75,000 venture-backed startups spanning 20 years. The research published in the Strategic Management Journal.

Previous work suggested that companies relocate in search of employees or customers. But that’s not what Shi and his colleagues found. 

“We find that these performance advantages are explained by startups moving closer to their existing investors located in another country and tapping into their networks and resources,” Shi said. 

Companies tended to move to the home countries of their foreign investors or where their domestic investors had contacts. In both cases, startups benefited from their investors' social capital, which led to financial capital.

“We also find that there is a window for moving strategically: The likelihood of moving peaks when the company is around three to five years old, and those moving within the first five years since the founding reap more benefits,” he said.

The research revealed other patterns as well. Shi said that many people assume companies migrate to the United States and stay. While the United States was the most popular destination for startups, he said, it also saw the highest number of companies leaving for other countries.

Among companies that moved to the United States, fewer than 40% chose Silicon Valley. 

“Silicon Valley, while remaining important, is no longer the gravity center,” Shi said. “In reality, there is a variety of migration paths and destination choices, reflecting geographic dispersion rather than concentration through migration.”


For additional information, see this Cornell Chronicle story.

Cornell University has dedicated television and audio studios available for media interviews.



Journal Link: Strategic Managment Journal, Feb-2024