A Comparative Analysis of Government and Private Investments Impact on Start-Up Success
- 1 Monroe Township High School, Monroe Township, USA
Abstract
With a multitude of different investors, it can be difficult to discern which investor will benefit startups the most in terms of what the start-ups are looking for. The problem being addressed in this research is the challenge that startups face when identifying the best type of venture capital (VC) investment—specifically between government venture capital (GVC) and private venture capital (PVC). This is important to analyze as the choice of VC significantly impacts the long-term success and growth potential of the startup. The research aims to offer insights into the optimal VC investment strategy that allows startups to reach their full potential. It does this through comparison of the effects of GVC on startups and analyzing various factors such as timing and type of support provided. This analysis is conducted through major papers in the field which led to multiple conclusions. One of the major findings was that a blended approach with VCs is important, they both provide different support (not financial), and the timing of VC investment is critical in growth of the startup.
- Alperovych, Y., Groh, A., & Quas, A. (2020). Bridging the Equity Gap for Young Innovative Companies: The Design of Effective Government Venture Capital Fund Programs. Research Policy, 49, Article 104051. https://doi.org/10.1016/j.respol.2020.104051
- Amit, R., Brander, J., & Zott, C. (1998). Why Do Venture Capital Firms Exist? Theory and Canadian Evidence. Journal of Business Venturing, 13, 441-466. https://doi.org/10.1016/s0883-9026(97)00061-x
- Brander, J. A., Du, Q., Hellmann, T. F., & National Bureau of Economic Research (2010). The Effects of Government-Sponsored Venture Capital: International Evidence . National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w16521/w16521.pdf
- Cochrane, J. H. (2005). The Risk and Return of Venture Capital. Journal of Financial Economics, 75, 3-52. https://doi.org/10.1016/j.jfineco.2004.03.006
- Gornall, W., & Strebulaev, I. A. (2015). The Economic Impact of Venture Capital: Evidence from Public Companies. SSRN Electronic Journal . https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2681841
- Hochberg, Y. V., & Fehder, D. C. (2015). Accelerators and Ecosystems. Science, 348, 1202-1203. https://doi.org/10.1126/science.aab3351
- Luukkonen, T., Deschryvere, M., & Bertoni, F. (2013). The Value Added by Government Venture Capital Funds Compared with Independent Venture Capital Funds. Technovation, 33, 154-162. https://doi.org/10.1016/j.technovation.2012.11.007
- Nguyen, G., Nguyen, M., Pham, A. V., & Pham, M. D. (2023). Navigating Investment Decisions with Social Connectedness: Implications for Venture Capital. Journal of Banking & Finance, 155, Article 106979. https://doi.org/10.1016/j.jbankfin.2023.106979
- Samila, S., & Sorenson, O. (1970). Venture Capital, Entrepreneurship, and Economic Growth. Review of Economics and Statistics, 93, 338-349. https://econpapers.repec.org/RePEc:tpr:restat:v:93:y:2011:i:1:p:338-349 https://doi.org/10.1162/rest_a_00066
- Testa, G., Quas, A., & Compañó, R. (2024). Governmental Venture Capital Policies Are Not All Alike: Design Features in 11 European Countries. Venture Capital . https://doi.org/10.1080/13691066.2024.2391373
- Zhang, J., Fan, Y., & Liu, Y. (2024). The Effects of Government Venture Capital: New Evidence from China Based on a Two-Sided Matching Structural Model. Journal of Corporate Finance, 84, Article 102521. https://doi.org/10.1016/j.jcorpfin.2023.102521