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Working Paper

Financing Ventures: Some Macroeconomics


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.

JEL Classification: E13; E22; G24; L26; O16; O31; O40;

https://doi.org/10.20955/wp.2017.035

Status: Published in International Economic Review

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Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2017-08-01

Number: 2017-35

Note: Publisher DOI: https://doi.org/10.1111/iere.12561

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