Venture capital and the promotion of innovative start-up

Abstract

We start justifying our focus on innovative start-ups based on their decisive contribution to economic growth and job creation at the regional and country level. To support innovative start-ups, effective venture capital (VC) markets, as an alternative to conventional financing intermediaries, have shown to play an important role beyond its financing function. We review the successful experience of the VC market in the U.S. and the contrasting experiences of replications around the world. This essay also describes some empirical evidences of how effective commonly applied policy approaches have been in the development of active VC markets. Most of the studies about VC have focus on the key advising and consulting role of private VC firms. Therefore, we would like to elaborate the role of public VC and put emphasis on the complementary role of public VC companies, by looking at the case from Germany. The difference of the objective between public and private VC will also be explored, hence “who-does-what” in supporting innovative entrepreneurship will be clear.

The complete paper can be found here.