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Doing well by doing good? Community development venture capital

Anna Kovner and Josh Lerner ()

No 572, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper examines the investments and performance of community development venture capital (CDVC). We find substantial differences between CDVC and traditional venture capital (VC) investments: CDVC investments are far more likely to be in nonmetropolitan regions and in regions with little prior venture capital activity. Moreover, CDVC is likely to be in earlier-stage investments and in industries outside the venture capital mainstream that have lower probabilities of successful exit. Even after we control for this unattractive transaction mix, the probability of a CDVC investment being successfully exited is lower. One benefit of CDVCs may be their effect in bringing traditional VC investment to underserved regions: When we control for the presence of traditional VC investments, each additional CDVC investment results in an additional 0.06 new traditional VC firm in a region.

Keywords: community development; venture capital (search for similar items in EconPapers)
JEL-codes: G20 G24 G28 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ent and nep-ure
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