Chapter 15: Venture capital and IPO waves in Europe: an analysis of firm and performance characteristics
Venture capital (VC) is one of the most important financing sources for entrepreneurial start-up firms. A large body of theoretical and empirical literature documents venture capitalists’ ability to carefully screen new ventures, monitor management and provide strategic and operating advice to their portfolio firms (Gompers and Lerner, 1999; Metrick and Yasuda, 2011). In addition, venture capitalists mitigate information asymmetries between the entrepreneur and the VC firm as well as between the VC firm and its investors (Sahlman, 1990). Venture capital-financed firms also grow more rapidly and have higher survival probabilities compared to non-VC-financed firms, demonstrating the importance of venture capital for economic growth (Jain and Kini, 2000; Bessler et al., 2012d; Puri and Zarutskie, 2012). This is supported by the observation that an increase in employment and new job creation is strongly related to the growth rate of start-up firms but not to small firms per se (Haltiwanger et al., 2010).
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