5. VCs, Technology Firms, and Governance: Examining the Tentacles of Digital Growth

In this chapter, we attempt to better understand the conditions for the rapid growth of the digital economy. We begin by examining some of the factors, and their confluence, that have made the rapid expansion of the digital economy possible, including laws and policies, increased access to the Internet, network effects, innovation and entrepreneurship, and funding. Our focus is particularly on the role of venture capital (VC) in this story of unprecedented growth. A substantial part of the chapter focuses on the complex role that VC plays – beyond the ambit of funding – as an intrinsic actor that has shaped the digital economy in a variety of ways and has played a decisive role in interlinking several aspects of the digital economy, from influencing policies to changing market trends. Crucially, we ask what the role of venture capital means for governments as digital technologies, and the firms that create these, become an important part of governance structures. We attempt to understand the role that venture capitalists have played in building and consolidating the technology industry, and why it warrants more scrutiny. The chapter ends by perhaps raising more questions than we can answer and attempts to justify why a closer examination of the history, composition, and interrelations of VCs will help us better understand, regulate, and strengthen the digital economy – and VCs, too.