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Financing Ventures

Jeremy Greenwood, Pengfei Han () and Juan Sanchez

No 2017-35, Working Papers from Federal Reserve Bank of St. Louis

Abstract: The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., statistics by funding round concerning the success rates, failure rates, investment rates, equity shares, and IPO values. Raising capital gains taxation reduces growth and welfare.

Keywords: capital gains taxation; dynamic contract; endogenous growth; evaluating; funding rounds; growth regressions; IPO; monitoring; startups; research and development; venture capital (search for similar items in EconPapers)
JEL-codes: E13 E22 G24 L26 O16 O31 O40 (search for similar items in EconPapers)
Pages: 67
Date: 2019-12-11
New Economics Papers: this item is included in nep-cfn, nep-dge, nep-ent, nep-fdg, nep-gro, nep-pay and nep-sbm
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Working Paper: Financing Ventures (2018) Downloads
Working Paper: Financing Ventures (2018) Downloads
Working Paper: Financing Ventures (2018) Downloads
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DOI: 10.20955/wp.2017.035

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