I develop a model of venture capital (VC) intermediation that can quantitatively explain central empirical facts about VC activity and allows evaluating its impact on economic growth. The framework reveals how pro-cyclical VC investment dynamics reinforce themselves through a risk premium channel that rationalizes low funding standards in booms. VC investments’ aggregate impact is significantly...

the new venture valuation is an important issue in the field of venture capital because it determines the ownership percentage of the venture capital in the investee firm. as a result, it is the main challenge in investment negotiations between entrepreneur and potential investors. this study aims to identify and grade factors affecting new ventures valuation by venture capitalists through a de...

The positive effect of venture capital (VC) on firm growth has been widely documented. However, there exists a large variation in VC-backed firms, with only small number reaching substantial size. Prior studies have linked the firms to differences resource endowments entrepreneurial top management team, or capitalist, without considering their potentially complex interactions. In addition, lite...

paper presents preliminary fi ndings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in this paper are those of the authors and are not necessarily refl ective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors. fo...

While health policy scholars wish to encourage the creation of technologies that bring more value to healthcare, they may not fully understand the mandate of venture capitalists and how they operate. This paper aims to clarify how venture capital operates and to illustrate its influence over the kinds of technologies that make their way into healthcare systems. The paper draws on the internatio...

Oversight and involvement are essential for a venture capital firm to influence the destiny of the portfolio company. This paper focuses primarily on the venture capital firm’s decision to take a formal responsibility through joining the board. Our study uses a large sample of private British companies that received institutional investment between 1999 and 2002. We examine the determinants of ...

Stage financing is the basic operation of venture capital investment. In investment, usually venture capitalists use different strategies to obtain the maximum returns. Due to its advantages to reduce the information asymmetry and agency cost, stage financing is widely used by venture capitalists. Although considerable attentions are devoted to stage financing, very little is known about the ri...

The taxation of capital gains is a perennial issue in tax policy. One critical aspect for understanding the overall effects of capital gains taxation is how these taxes affect entrepreneurs. While many analyses focus on the disincentive effects created by capital gains taxes for investors in large corporations, these disincentives may be even more important for entrepreneurs. This paper discuss...

Evidence on the “funding gap” for innovation is surveyed. The focus is on financial market reasons for underinvestment in innovation that persist even in the absence of externality-induced underinvestment. The conclusions are that 1) small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital; 2) evidence for high costs of R&...