Bridging the equity gap for young innovative companies: The design of effective government venture capital fund programs

Governmental venture capital funds (GVCs) are created by policymakers around the world to support young innovative companies (YICs) with the aim of \u201cbridging the equity gap\u201d. In this paper, we study the heterogeneity in the design of GVC programs in Europe and identify the design features that are most effective in achieving the desired outcomes of this policy. Specifically, we focus on the probability that GVC-backed companies will receive additional funds from private venture capital investors and, ultimately, changes in their growth and innovation outcomes. We find that the choices of location, colocation, syndication and industry focus of a GVC program substantially influence the extent to which it is able to achieve such goals. Important policy implications are discussed

Direct and Indirect Government Venture Capital Investments in Europe

This paper provides evidence of the broad government presence in the European venture capital industry. Two forms of intervention are considered: first, direct stand-alone government venture capital funds and, second, indirect private funds to which governments commit funds as limited partners. The overall government presence seems to be much more important than previously documented, as we find that the government intervenes, on average, in 42.2% of venture capital investments in Europe. We also show that European countries are heterogeneous in their use of these two channels, and we consider possible early explanations for this choice of policy mix. Lastly, we provide some evidence on the consequences of these policies in terms of SME's perceived access to financing

Incremental impact of venture capital financing

This paper investigates the differences in the return generating process of venture capital (VC)-backed firms and their peers that operate without VC financing. Using a unique hand-picked database of 990 VC-backed Belgian firms and a complete population of Belgian small and medium-sized enterprises (SMEs), we focus on the extent to which the presence of a VC investor affects the sensitivity of a firm's returns to the changes in the capital structure, in the operating cycle, and in the industry dynamics. The differences may stem from the (self-) selection of better companies into VC portfolios, from the venture capitalists' (VCs) value-adding activities, and/or from both. We examine these factors in the context of a complex simulation procedure which allows separating selection from value-adding when traditional approaches are difficult to implement. Our results indicate that VC-backed firms are able to extract more rent from the changing industry conditions and from the optimizations in their capital structure. The presence of VCs in the firm's equity seems to have only a marginal effect on the operating cycle efficiency. Overall, the results are suggestive of the value-adding being the main driver of the VC-backed firm's performance

Private equity: where we have been and the road ahead

We provide an overview of the systematic evidence relating to the impact of private equity backed buyouts over the last two decades. We focus on performance; employment and employee relations; innovation, investment and entrepreneurship; longevity and survival. We also explore a future research agenda in the context of a maturing PE industry

How does governmental versus private venture capital backing affect a firm’s efficiency? Evidence from Belgium

We investigate the implications of venture capital (VC) investor type (government or private) on the operating efficiency of a sample of 515 Belgian portfolio firms up to 3. years after the investment. We find that the government VC-backed firms display significant reductions in productivity. No significant differences in efficiency are found in firms backed by private VC compared with their non-VC-backed peers. Finally, significant reductions in efficiency exist in targets of government VC compared to their non-VC-backed peers.SCOPUS: ar.jinfo:eu-repo/semantics/publishe

New Frontiers in Entrepreneurial Finance Research

This book provides an updated view of new trends in entrepreneurial finance, with the aim of guiding academics and non-academics alike that want to gain a deeper understanding of this field. It collects recent contributions from scholars from all over the world. Each chapter provides new empirical or theoretical evidence on fundamental issues related to entrepreneurial finance, including business angels, crowdfunding, Initial Coin Offerings, Mini bonds, public support and more. Besides reviewing the recent trends in the field, the book also highlights new avenues for research, and implications for practitioners