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Access to Venture Capital and the Performance of Venture-Backed Start-Ups in Silicon Valley

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  • Junfu Zhang

    (Clark University)

Abstract

This article examines start-ups' access to venture capital in Silicon Valley using a comprehensive database. The author finds that Silicon Valley consistently absorbs 20% to 26% of the total venture capital investment in the United States, and start-ups in this region benefit from the abundance of local venture capital. Venture-backed firms in Silicon Valley receive venture capital at a younger age and complete more rounds of financing. On one hand, this better access to capital makes start-ups in Silicon Valley more likely than start-ups elsewhere to complete initial public offerings and helps offset some of the negative effects of intense competition in the region. On the other hand, better access to venture capital is associated with a higher bankruptcy rate, possibly because competition for new ventures makes it more likely that poor business plans will get funding.

Suggested Citation

  • Junfu Zhang, 2007. "Access to Venture Capital and the Performance of Venture-Backed Start-Ups in Silicon Valley," Economic Development Quarterly, , vol. 21(2), pages 124-147, May.
    • Handle: RePEc:sae:ecdequ:v:21:y:2007:i:2:p:124-147
    DOI: 10.1177/0891242406298724
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    References listed on IDEAS

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    Cited by:

    1. Jean Rédis & Jean-Michel Sahut, 2014. "Entrepreneuriat répété, capital organisationnel et accès au financement par capital-risque," Working Papers 2014-260, Department of Research, Ipag Business School.
    2. Karolina Koziol & Rafa³ Pitera, 2018. "Selected Methods of Risk Evaluation of Start-Up Enterprises (Wybrane metody oceny ryzyka przedsiewziec start-upowych)," Research Reports, University of Warsaw, Faculty of Management, vol. 1(27), pages 151-159.
    3. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1197-1287, Elsevier.
    4. Junfu Zhang, 2009. "The performance of university spin-offs: an exploratory analysis using venture capital data," The Journal of Technology Transfer, Springer, vol. 34(3), pages 255-285, June.
    5. Pierrakis, Yannis & Saridakis, George, 2017. "Do publicly backed venture capital investments promote innovation? Differences between privately and publicly backed funds in the UK venture capital market," Journal of Business Venturing Insights, Elsevier, vol. 7(C), pages 55-64.
    6. Junfu Zhang, 2011. "The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs," Small Business Economics, Springer, vol. 36(2), pages 187-208, February.
    7. Ausra Gvazdaityte, 2012. "The analysis of the conditions needed for building venture capital industry in Lithuania," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(3), pages 096-105.
    8. Colin Mason, 2010. "Entrepreneurial finance in a regional economy," Venture Capital, Taylor & Francis Journals, vol. 12(3), pages 167-172, July.
    9. Humphery-Jenner, M., 2011. "Diversification in Private Equity Funds : On Knowledge-sharing, Risk-aversion and Limited-attention," Other publications TiSEM 3e22d8a9-6846-484f-a09e-7, Tilburg University, School of Economics and Management.
    10. Humphery-Jenner, M., 2011. "Diversification in Private Equity Funds : On Knowledge-sharing, Risk-aversion and Limited-attention," Discussion Paper 2011-046, Tilburg University, Center for Economic Research.

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