The Role of Venture Capital in the Entrepreneurial Finance Ecosystem: Future Threats and Opportunities

49 Pages Posted: 25 Jan 2019 Last revised: 21 Feb 2019

See all articles by Stefano Bonini

Stefano Bonini

Stevens Institute of Technology - School of Business

Vincenzo Capizzi

University of Piemonte Orientale - Department of Economics and Business Studies; SDA Bocconi School of Management

Date Written: February 14, 2019

Abstract

Despite the enduring relevance of venture capital as a source of funding for new firms, the last decade has seen the emergence of multiple alternative sources of funding, radically reshaping the start-up ecosystem and posing new questions for both academics and practitioners. In this review paper, we provide a comprehensive analysis of the challenges and opportunities opened by these new financing structures, trying to shed light on the features, investment policies and risk-return profiles of institutional and informal investors providing capital to early stage companies.

We begin by critically reviewing the strengths and weaknesses of the main alternative capital providers. We then highlight that traditional closed-end venture capital funds, while experiencing competitive pressure, still play a critical role in the financing structure of new firms because of their unique production process and distinctive competencies. With conclude by providing a comprehensive representation of the complex and multidimensional nature of startups that can be useful to identify more effective fundraising strategies and tackle new and yet unexplored research questions.

Keywords: Venture Capital, Angels, New Venture Financing

JEL Classification: G24, L26

Suggested Citation

Bonini, Stefano and Capizzi, Vincenzo, The Role of Venture Capital in the Entrepreneurial Finance Ecosystem: Future Threats and Opportunities (February 14, 2019). Available at SSRN: https://ssrn.com/abstract=3315566 or http://dx.doi.org/10.2139/ssrn.3315566

Stefano Bonini (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Vincenzo Capizzi

University of Piemonte Orientale - Department of Economics and Business Studies ( email )

Via E. Perrone, 18
Novara, NO 28100
Italy
+390321375438 (Phone)
+390321375405 (Fax)

HOME PAGE: http://www.uniupo.it

SDA Bocconi School of Management ( email )

Via F. Bocconi, 8
Milan, Milan 20136
Italy
+390258365966 (Phone)
+390258366893 (Fax)

HOME PAGE: http://www.sdabocconi.it

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