 What is the effect of the financial crisis on venture capital financing? Empirical evidence from US Internet start-upsJoern Block and Philipp Sandner Venture Capital, 2009, vol. 11, issue 4, 295-309 Abstract: Employing a large dataset of venture capital investments in US Internet firms, we analyse the effect of the current financial crisis on the venture capital market. Using regression analysis, we find that the financial crisis is associated with a 20% decrease in the average amount of funds raised per funding round. This effect, however, can only be found in later funding rounds. We argue that firms in later financing rounds that need capital to survive cannot avoid a deduction induced by the financial crisis, whereas firms that seek initial funding postpone their funding and expansion plans until the capital markets have stabilized. Furthermore, firms in later phases of the venture cycle are more likely to be negatively affected by the weak IPO market than firms seeking initial funding. Our results suggest that the financial crisis can lead to a severe ‘funding gap’ in the financing of technological development and innovation. Date: 2009 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:veecee:v:11:y:2009:i:4:p:295-309 Ordering information: This journal article can be ordered from DOI: 10.1080/13691060903184803 Access Statistics for this article Venture Capital is currently edited by Colin Mason and Richard T. Harrison More articles in Venture Capital from Taylor & Francis Journals |
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