Financing Ventures

70 Pages Posted: 22 Sep 2020 Last revised: 17 Nov 2021

See all articles by Jeremy Greenwood

Jeremy Greenwood

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Pengfei Han

Peking University, Guanghua School of Management

Juan M. Sánchez

Federal Reserve Banks - Federal Reserve Bank of St. Louis; Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: November 16, 2021

Abstract

The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital: statistics by funding round concerning success rates, failure rates, investment rates, equity shares, and IPO values. The increased efficiency offered by venture capital for financing inventive startups is important for long-run growth and welfare.

Keywords: capital gains taxation, dynamic contracts, endogenous growth, evaluating, financial development, funding rounds, IPO, monitoring, startups, research and development, venture capital

JEL Classification: E13, E22, G24, L26, O16, O31, O40

Suggested Citation

Greenwood, Jeremy and Han, Pengfei and Sanchez, Juan M. and Sanchez, Juan M., Financing Ventures (November 16, 2021). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper , Available at SSRN: https://ssrn.com/abstract=3696658 or http://dx.doi.org/10.2139/ssrn.3696658

Jeremy Greenwood (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1505 (Phone)

HOME PAGE: http://jeremygreenwood.net

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pengfei Han

Peking University, Guanghua School of Management ( email )

No 5 Yiheyuan Road, Haidian District
Beijing 100871
China

HOME PAGE: http://https://sites.google.com/view/pengfeihan/home

Juan M. Sanchez

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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

Paper statistics

Downloads
70
Abstract Views
383
rank
413,450
PlumX Metrics