nach oben

Journal of International Entrepreneurship

Erschienen in:

01.03.2009

Pre-seed government venture capital funds

verfasst von: Douglas Cumming, Sofia Johan

Erschienen in: Journal of International Entrepreneurship | Ausgabe 1/2009

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This paper analyses a Pre-seed Fund (PSF) government venture capital (VC) program for the purpose of improving our understanding about effective public policy towards entrepreneurial finance. The PSF program is a public-private partnership started in 2002 for the purpose of fostering more investment in nascent high-tech entrepreneurial firms in Australia. Data from Venture Economics indicate PSFs are the primary provider of seed stage VC in Australia, but PSFs are not more likely to invest in high-tech firms than other types of VC funds. PSFs have smaller portfolios (number of investees) per manager than other types of VC funds, and are more likely to invest in firms resident in the same state, but do not stage and syndicate more frequently than other types of VC funds. Overall, therefore, the structure of the program has given rise to mixed performance in terms of finance and governance provided to nascent high-tech entrepreneurial firms. As well, there is also suggestive evidence that the PSF program diminishes the incentives for Innovation Investment Funds (a previously existing Australian government VC fund program) to invest in seed stage ventures, and hence competing government initiatives appear to be crowding out one another. Further evidence suggests that among the four PSFs in existence, one PSF has outperformed the other PSFs in regards to the investee firm patents and financial statement performance, even though this fund has invested less money and charged lower management fees than its counterparts. Hence, a further implication is that the impact of government-sponsored VC funds depends not only on the design of the program but also on the selection of the VC managers carrying out the investments.

Vorheriger Artikel Entrepreneurial characteristics in Switzerland and the UK: A comparative study of techno-entrepreneurs

Nächster Artikel The overestimated role of strategic orientations for international performance in smaller firms

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

See, e.g., Cressy (2002), Keuschnigg and Nielsen (2003a), Kanniainen and Keuschnigg (2004), Carpentier and Suret (2006), Bruton et al. (2006), Jääskeläinen et al. (2007)

For the purposes of this paper, the term private equity is used to encompass both the earlier stages of VC financing and also later stage private financing, including but not limited to mezzanine, buy-outs and turnaround financing.

See, for example, http://www.ausindustry.gov.au/content/level2index.cfm?objectID=91C779C9-E2FF-4B9B-8A3C0EC058CE647C. See also Department of Industry, Tourism and Resources (2004).

Note that while the PSFs first started investing in 2002, Figs. 1 and 2 indicate PSF investments in 2000 and 2001. The reason for this discrepancy is that Figs. 1 and 2 are graphed for the date of first VC investment in the particular portfolio firm. Hence, the earlier VC investments are investments already in the pipeline before the PSF was “officially” announced as a beneficiary of the program or received its funding from the Australian Government.

See, e.g., Judge et al. (1988); see also http://en.wikipedia.org/wiki/Logistic_regression

The regressions make use of 961 of the 970 observations due to the fact that the investment year could not be ascertained for nine investments.

Separate dummy variables are not used for the four different PSFs since the PSFs are compared on a relative basis to other fund types and not specific funds within other fund types, and hence it is appropriate to only consider dummy variables for the type of fund and not specific funds within one class of funds. The econometric evidence herein thereby shows the performance of the average PSF. As well, each individual PSF has not had a sufficient number of investments that give rise statistically significant interpretations in the regression analyses for separate dummy variables (but collectively for all four PSFs there are a sufficient number of PSF investments).

Alternative specifications were excluded for reasons of succinctness, but are available on request (the reported results did not change in a material way with alternative specifications).

Note that the dummy variable for universities are excluded for the late and buyout stage regressions (Models 4–5) because there were not university investments at those stages; hence the variable had to be excluded to avoid perfect collinearity. This collinearity issue likewise applies for the other variables excluded in each of the regression tables.

This result is not attributable to correlation between the MSCI index and the bubble investment year dummy variable. The results are very similar to the inclusion/exclusion of either of these variables.

In total, 280 different funds exist in the AVCAL data. Only 164 funds are used in Models (5) and (6) in Table 5 because the data do not comprise a complete set of details for 116 of the 280 funds.

Armour J, Cumming DJ (2006) The legislative road to Silicon Valley. Oxf Econ Pap 58:596–635 doi:10.1093/oep/gpl007 CrossRef

Beuselinck C, Manigart S (2007) Financial reporting quality in private equity backed companies: the impact of ownership concentration. Small Bus Econ 29:261–274 doi:10.1007/s11187-006-9022-1 CrossRef

Black BS, Gilson RJ (1998) Venture capital and the structure of capital markets: banks versus stock markets. J Financ Econ 47:243–277 doi:10.1016/S0304-405X(97)00045-7 CrossRef

Bruton GD, Fried VH, Manigart S (2006) Institutional influences on the worldwide expansion of venture capital. Entrep Theory Pract 30:687–708 doi:10.1111/j.1540-6520.2006.00142.x CrossRef

Carpentier C, Suret JM (2006) Bypassing the financial growth cycle: evidence from Capital Pool Companies. J Bus Venturing 21:45–73 doi:10.1016/j.jbusvent.2005.01.001 CrossRef

Cressy R (2002) Funding gaps: a symposium. Econ J 112:F1–F16 doi:10.1111/1468-0297.00680 CrossRef

Cumming DJ (2006) The determinants of venture capital portfolio size: empirical evidence. J Bus 79:1083–1126 doi:10.1086/500670 CrossRef

Cumming DJ (2007) Government policy towards entrepreneurial finance: innovation investment funds. J Bus Venturing 22:193–235 doi:10.1016/j.jbusvent.2005.12.002 CrossRef

Cumming DJ, Johan SA (2006) Provincial preferences in private equity. Financ Mark Portfolio Manage 20:369–398 doi:10.1007/s11408-006-0030-6 CrossRef

Cumming DJ, Johan SA (2007) Advice and monitoring in venture capital finance. Financ Mark Portfolio Manage 21:3–43 doi:10.1007/s11408-006-0041-3 CrossRef

Cumming DJ, MacIntosh JG (2006) Crowding out private equity: Canadian evidence. J Bus Venturing 21:569–609 doi:10.1016/j.jbusvent.2005.06.002 CrossRef

Cumming DJ, MacIntosh JG (2007) Mutual funds that invest in private equity? An analysis of labour sponsored investment funds. Camb J Econ 31:445–487 doi:10.1093/cje/bel041 CrossRef

Cumming DJ, Walz U (2004) Private equity returns and disclosure around the world. Working Paper. Center for Financial Studies, Frankfurt

Department of Industry, Tourism and Resources (2004) AusIndustry venture capital programs. September 21, 2004 document

Dimitratos P, Jones MV (2003) Editorial public policy for international entrepreneurial small firms: a plea for customised support measures. J Int Entrep 1:335–337 doi:10.1023/A:1025682607203 CrossRef

Fama EF, French KR (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33:3–56 doi:10.1016/0304-405X(93)90023-5 CrossRef

Fama EF, French KR (1995) Size and book-to-market factors in earnings and returns. J Finance 50:131–156 doi:10.2307/2329241 CrossRef

Gilson RJ (2003) Engineering a venture capital market: lessons from the American experience. Stanford Law Rev 55:1067–1103

Gompers PA (1995) Optimal investment, monitoring, and the staging of venture capital. J Finance 50:1461–1489 doi:10.2307/2329323 CrossRef

Gompers PA, Lerner J (1999) The venture capital cycle. MIT Press, Cambridge

Hsu D (2004) What do entrepreneurs pay for venture capital affiliation. J Finance 59:1805–1844 doi:10.1111/j.1540-6261.2004.00680.x CrossRef

Jääskeläinen M, Maula MVJ, Murray GC (2007) Profit distribution and compensation structures in publicly and privately funded hybrid venture capital funds. Res Policy 36:913–929 doi:10.1016/j.respol.2007.02.021 CrossRef

Jeng LA, Wells PC (2000) The determinants of venture capital funding: evidence across countries. J Corp Finance 6:241–289 doi:10.1016/S0929-1199(00)00003-1 CrossRef

Judge GG, Griffiths WE, Hill RC, Lutkepohl H, Lee T-C (1988) Introduction to the theory and practice of econometrics, 2nd edn. Wiley

Kanniainen V, Keuschnigg C (2003) The optimal portfolio of start-up firms in venture capital finance. J Corp Finance 9:521–534 doi:10.1016/S0929-1199(02)00021-4 CrossRef

Kanniainen V, Keuschnigg C (2004) Start-up investment with scarce venture capital support. J Bank Finance 28:1935–1959 doi:10.1016/j.jbankfin.2003.07.005 CrossRef

Keuschnigg C (2003) Optimal public policy for venture capital backed innovation. CEPR Working Paper No. 3850

Keuschnigg C (2004a) Taxation of a venture capitalist with a portfolio of firms. Oxf Econ Pap 56:285–306 doi:10.1093/oep/gpf041 CrossRef

Keuschnigg C (2004b) Venture capital backed growth. J Econ Growth 9:239–261 doi:10.1023/B:JOEG.0000031428.35711.fc CrossRef

Keuschnigg C, Nielsen SB (2001) Public policy for venture capital. Int Tax Public Finance 8:557–572 doi:10.1023/A:1011251920041 CrossRef

Keuschnigg C, Nielsen SB (2003a) Tax policy, venture capital and entrepreneurship. J Public Econ 87:175–203 doi:10.1016/S0047-2727(01)00170-0 CrossRef

Keuschnigg C, Nielsen SB (2003b) Taxes and venture capital support. Rev Finance 7:515–539 doi:10.1023/B:EUFI.0000022144.17225.35 CrossRef

Keuschnigg C, Nielsen SB (2004a) Progressive taxation, moral hazard, and entrepreneurship. J Public Econ Theory 6:471–490 doi:10.1111/j.1467-9779.2004.00175.x CrossRef

Keuschnigg C, Nielsen SB (2004b) Start-ups, venture capitalists and the capital gains tax. J Public Econ 88:1011–1042 doi:10.1016/S0047-2727(03)00046-X CrossRef

Kortum S, Lerner J (2000) Assessing the contribution of venture capital to innovation. Rand J Econ 31:647–692 doi:10.2307/2696354 CrossRef

Leleux B, Surlemont B (2003) Public versus private venture capital: seeding or crowding out? A Pan-European analysis. J Bus Venturing 18:81–104 doi:10.1016/S0883-9026(01)00078-7 CrossRef

Lerner J (1994) The syndication of venture capital investments. Financ Manag 23:16–27 doi:10.2307/3665618 CrossRef

Lerner J (1999) The government as venture capitalist: the long-run effects of the SBIR program. J Bus 72:285–318 doi:10.1086/209616 CrossRef

Lerner J (2002) When bureaucrats meet entrepreneurs: the design of effective ‘public venture capital’ programmes. Econ J 112:F73–F84 doi:10.1111/1468-0297.00684 CrossRef

Lockett A, Wright M (1999) The syndication of private equity: evidence from the U.K. Venture Cap Int J Entrepreneurial Finance 1:303–324 doi:10.1080/136910699295839 CrossRef

Lockett A, Wright M (2001) The syndication of venture capital investments. Omega. Int J Manage Sci 29:375–390

Manigart S, DeWaele K, Wright M, Robbie K, Desbrieres P, Sapienza HJ et al (2002) The determinants of the required returns in venture capital investments: a five-country study. J Bus Venturing 17:291–312 doi:10.1016/S0883-9026(00)00067-7 CrossRef

Manigart S, Lockett A, Meuleman M, Wright M, Landstrom H, Bruining H et al (2006) Venture capitalists’ decision to syndicate. Entrep Theory Pract 30:131–153 doi:10.1111/j.1540-6520.2006.00115.x CrossRef

Manigart S, Collewaert V, Wright M, Pruthi S, Lockett A, Bruining H et al (2007) Human capital and the internationalisation of venture capital firms. The International Entrepreneurship and Management Journal 3:109–125 doi:10.1007/s11365-006-0021-0

Mann RJ, Sager TW (2007) Patents, venture capital and software start-ups. Res Policy 36:193–208 doi:10.1016/j.respol.2006.10.002 CrossRef

Organization for Economic Corporation and Development (1996) Government programmes for venture capital. Organization for Economic Corporation and Development, Paris

Parker S (2007) Law and the economics of entrepreneurship. Comp Labor Law Policy J 28:695–715

Poterba J (1989a) Capital gains tax policy towards entrepreneurship. Natl Tax J 42:375–389

Poterba J (1989b) Venture capital and capital gains taxation. In: Lawrance H, Summers (ed) Tax policy and the economy 3. MIT Press, Cambridge, pp 47–67

Sahlman WA (1990) The structure and governance of venture capital organizations. J Financ Econ 27:473–524 doi:10.1016/0304-405X(90)90065-8 CrossRef

Sapienza H, Manigart S, Vermeir W (1996) Venture capital governance and value-added in four countries. J Bus Venturing 11:439–469 doi:10.1016/S0883-9026(96)00052-3 CrossRef

Shepherd DA, Zacharakis AL, Baron RA (2003) VCs’ decision processes: evidence suggesting more experience may not always be better. J Bus Venturing 18:381–401 doi:10.1016/S0883-9026(02)00099-X CrossRef

Shepherd DA, Armstrong MJ, Lévesque M (2005) Allocation of attention within venture capital firms: a queuing network model. Eur J Oper Res 163:545–564

Tykvova’ T (2000) Venture capital in Germany and its impact on innovation. Working Paper. Centre for European Economic Research (ZEW), University of Mannheim

Tykvova’ T, Walz U (2007) How important is participation of different VCs in German IPOs. Glob Finance J 17:350–378 doi:10.1016/j.gfj.2006.05.008 CrossRef

Westhead P, Ucbasaran D, Wright M (2005) Policy toward novice, serial and portfolio entrepreneurs. Environ Plann C Gov Policy 22:779–798 doi:10.1068/c041 CrossRef

White H (1980) A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48:817–838 doi:10.2307/1912934 CrossRef

Wright M, Lockett A (2003) The structure and management of alliances: syndication in the venture capital industry. J Manage Stud 40:2073–2102 doi:10.1046/j.1467-6486.2003.00412.x CrossRef

Wright M, Lockett A, Pruthi S, Manigart S, Sapienza HJ, Desbrières P et al (2004) Venture capital investors, capital markets, valuation and information: US, Europe and Asia. J Int Entrep 2:305–326 doi:10.1007/s10843-004-0131-0 CrossRef

Wright M, Clarysse B, Lockett A, Binks M (2006) University spin-out companies and venture capital. Res Policy 35:481–501 doi:10.1016/j.respol.2006.01.005 CrossRef

Zacharakis AL, Shepherd DA (2001) The nature of information and venture capitalists’ overconfidence. J Bus Venturing 16:311–332 doi:10.1016/S0883-9026(99)00052-X CrossRef

Zacharakis AL, Shepherd DA (2003) A non-additive decision-aid for venture capitalists’ investment decisions. Eur J Oper Res 162:673–689 doi:10.1016/j.ejor.2003.10.028 CrossRef

Titel: Pre-seed government venture capital funds
verfasst von: Douglas Cumming
Sofia Johan
Publikationsdatum: 01.03.2009
Verlag: Springer US
Erschienen in: Journal of International Entrepreneurship / Ausgabe 1/2009
Print ISSN: 1570-7385
Elektronische ISSN: 1573-7349
DOI: https://doi.org/10.1007/s10843-008-0030-x

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Premium Partner