What is the Effect of the Current Financial Crisis on Venture Capital Financing? Empirical Evidence from US Internet Start-ups
Employing a large dataset regarding venture capital investments in US Internet firms, we analyze the effect of the current financial crisis on the venture capital market. Using regression analysis, we find that the financial crisis led to a 20% decrease in the average amount of funds raised per funding round. This effect, however, can only be found in later funding rounds. We argue that firms in later financing rounds that need capital to survive cannot avoid a deduction induced by the financial crisis, whereas firms that seek initial funding postpone their funding and expansion plans until the capital markets have stabilized. Furthermore, firms in later phases of the venture cycle are more likely to be negatively affected by the weak IPO market than firms seeking initial funding. Our results suggest that the financial crisis can lead to a severe "funding gap" in the financing of technological development and innovation.
|Date of creation:||21 Apr 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Koenker,Roger, 2005.
Cambridge University Press, number 9780521845731.
- 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.
- Timmons, Jeffry A. & Bygrave, William D., 1986. "Venture capital's role in financing innovation for economic growth," Journal of Business Venturing, Elsevier, vol. 1(2), pages 161-176.
- Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
- Keuschnigg. Christian, 2002.
"Venture Capital Backed Growth,"
Royal Economic Society Annual Conference 2002
114, Royal Economic Society.
- Christian Keuschnigg, 2002. "Venture Capital Backed Growth," University of St. Gallen Department of Economics working paper series 2002 2002-04, Department of Economics, University of St. Gallen.
- Christian Keuschnigg, 2002. "Venture Capital Backed Growth," CESifo Working Paper Series 664, CESifo Group Munich.
- Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
- Florida, Richard L. & Kenney, Martin, 1988. "Venture capital-financed innovation and technological change in the USA," Research Policy, Elsevier, vol. 17(3), pages 119-137, June.
- Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
- Laura Bottazzi & Marco Da Rin, 2002. "Venture capital in Europe and the financing of innovative companies," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 229-270, 04.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:14727. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.