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
Date Written: May 3, 2011
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: Suggested Citation