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Designing a public-private co-investment mechanism to foster venture capital

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  • Miguel Tavares-Gärtner
  • Paulo J. Pereira
  • Elísio Brandão

Abstract

In this paper we develop a co-investment mechanism for promoting early investment in Start-up Firms. Focusing on the (uncertain) payoffs earned by a Public Venture Capitalist (PVC) and an Independent Venture Capitalist (IVC), we model each of the alternative mechanisms as an investment timing real option and illustrate that co-investing might be the most effective mechanism to foster investment in Entrepreneurial Firms. Grounded on this theoretical framework, we list a set of both public policy and managerial implications.

Suggested Citation

  • Miguel Tavares-Gärtner & Paulo J. Pereira & Elísio Brandão, 2023. "Designing a public-private co-investment mechanism to foster venture capital," The European Journal of Finance, Taylor & Francis Journals, vol. 29(8), pages 869-887, May.
    • Handle: RePEc:taf:eurjfi:v:29:y:2023:i:8:p:869-887
    DOI: 10.1080/1351847X.2022.2035791
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