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What Drives Venture Capital Fundraising?

Author

Listed:
  • Paul A. Gompers

    (Harvard University
    National Bureau of Economic Research)

  • Josh Lerner

    (Harvard University
    National Bureau of Economic Research)

Abstract

We examine the determinants of venture capital fundraising in the U.S. over the past twenty-five years. We study industry aggregate, state-level, and firm-specific fundraising to determine if macroeconomic, regulatory, or performance factors affect venture capital activity. We find that shifts in demand for venture capital appear to have a positive and important impact on commitments to new venture capital funds. Commitments by taxable and tax-exempt investors seem equally sensitive to changes in capital gains tax rates that decreases in capital gains tax rates increase the demand for venture capital as more workers are incented to become entrepreneurs. Aggregate and state level venture fundraising are positively affected by easing of pension investment restrictions as well as industrial and academic R&D expenditures. Fund performance and reputation also lead to greater fundraising by venture organizations.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Paul A. Gompers & Josh Lerner, 1998. "What Drives Venture Capital Fundraising?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998 Micr), pages 149-204.
    • Handle: RePEc:bin:bpeajo:v:29:y:1998:i:1998-3:p:149-204
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    References listed on IDEAS

    as
    1. Josh Lerner, 1996. "The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program," NBER Working Papers 5753, National Bureau of Economic Research, Inc.
    2. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
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    9. Gompers, Paul & Lerner, Josh, 1996. "The Use of Covenants: An Empirical Analysis of Venture Partnership Agreements," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 463-498, October.
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    More about this item

    Keywords

    microeconomics; venture capital; innovation; fundraising; regulation; pension funds; capital gains tax rates; economic growth;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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