The 'New' Venture Capital Cycle (Part I): The Importance of Private Secondary Market Liquidity

Lex Research Topics in Corporate Law & Economics Working Paper No. 1/2011

39 Pages Posted: 4 May 2011 Last revised: 17 Aug 2011

See all articles by Jose Miguel Mendoza

Jose Miguel Mendoza

Universidad de Los Andes

Erik P. M. Vermeulen

Tilburg University - Department of Business Law; Signify (formerly known as Philips Lighting) - Legal Department; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI); Kyushu University - Graduate School of Law

Date Written: May 3, 2011

Abstract

This paper demonstrates that liquidity gaps disrupt the venture capital cycle. How should this problem be addressed? We offer a new perspective on the venture capital cycle and argue that the emergence of more liquidity options can bridge these gaps. Analyzing the development of secondary marketplaces for private shares in non-listed companies in the United States and similar initiatives in Europe, Israel and India, this paper makes the case that the development of a structured pre-IPO segment in stock markets can remedy the disruptions in the venture capital industry.

Keywords: venture capital, innovation, entrepreneurship, venture capital cycle, liquidity, stock markets, secondary markets, SecondMarket, SharesPost, IPO, trade sale

JEL Classification: G15, G18, G24, G28, K22

Suggested Citation

Mendoza, Jose M. and Vermeulen, Erik P.M., The 'New' Venture Capital Cycle (Part I): The Importance of Private Secondary Market Liquidity (May 3, 2011). Lex Research Topics in Corporate Law & Economics Working Paper No. 1/2011, Available at SSRN: https://ssrn.com/abstract=1829835 or http://dx.doi.org/10.2139/ssrn.1829835

Jose M. Mendoza

Universidad de Los Andes ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

Erik P.M. Vermeulen (Contact Author)

Tilburg University - Department of Business Law ( email )

Signify (formerly known as Philips Lighting) - Legal Department ( email )

Amstelplein 2
Amsterdam
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Kyushu University - Graduate School of Law ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, Fukuoka 812-8581
Japan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,850
Abstract Views
8,589
rank
13,521
PlumX Metrics