13 Government financing of startups
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Judit Karsai
Abstract
Governments play a significant role in financing startups at all stages of their development. Contrary to popular belief, the vast majority of startup financing is not provided by venture capital, but by grants and lending, for which public guarantees offer support. In the case of venture capital investments, the most effective way of government support is to co-invest with private investors and leverage the capital of private funds, rather than investing directly in startups. Government guarantees available to private investors of venture capital funds can also contribute to a significant increase in the volume of venture capital financing startups. Experience has shown that the most effective way for the government to finance startups is not by providing funds directly to companies, but by acting as a catalyst for funding by encouraging private players in the market. The analysis below illustrates which of the many solutions developed worldwide to provide government support have spread in practice and with what success.
Abstract
Governments play a significant role in financing startups at all stages of their development. Contrary to popular belief, the vast majority of startup financing is not provided by venture capital, but by grants and lending, for which public guarantees offer support. In the case of venture capital investments, the most effective way of government support is to co-invest with private investors and leverage the capital of private funds, rather than investing directly in startups. Government guarantees available to private investors of venture capital funds can also contribute to a significant increase in the volume of venture capital financing startups. Experience has shown that the most effective way for the government to finance startups is not by providing funds directly to companies, but by acting as a catalyst for funding by encouraging private players in the market. The analysis below illustrates which of the many solutions developed worldwide to provide government support have spread in practice and with what success.
Chapters in this book
- Frontmatter I
- Acknowledgments V
- Contents VII
- Editor and contributor biographies XI
- Introduction 1
-
Part I: The individual level
- Introduction 13
- 1 The role of founders’ tangible resources in founding new ventures 15
- The bootstrapping-bricolage interface 37
- 3 Effectuation and entrepreneurial finance 55
- 4 Portfolio entrepreneurs: The role of risk 75
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Part II: The inner circle
- Introduction 89
- 5 Informal financing of entrepreneurs 91
- 6 Funding entrepreneurs within business groups: An emerging market view 107
- 7 How business incubators and accelerators finance startups 119
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Part III: The wider world
- Introduction 137
- 8 Formal debt as a source of entrepreneurial finance 139
- 9 Microfinance and entrepreneurial finance: A review and future research agenda 153
- 10 Venture capital as a source of entrepreneurial finance 171
- 11 Corporate venture capital: A literature review and research agenda 195
- 12 The role of business angels in the new financial landscape 223
- 13 Government financing of startups 245
- 14 Family offices as startup investors: A synergetic relationship of the old and new economy? 265
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Part IV: Emerging perspectives
- Introduction 291
- 15 A scoping review of most influential entrepreneurial finance studies in developing countries 293
- 16 Conceptualizing gender in entrepreneurial finance: Past trends, current developments and future opportunities 317
- 17 Indigenous entrepreneurial finance: Mapping the landscape with Canadian evidence 335
- 18 Financing entrepreneurs in post-conflict and disaster zones 359
- 19 Ethics and entrepreneurial finance 375
- Conclusion 391
- List of figures 401
- List of tables 403
- Index 405
Chapters in this book
- Frontmatter I
- Acknowledgments V
- Contents VII
- Editor and contributor biographies XI
- Introduction 1
-
Part I: The individual level
- Introduction 13
- 1 The role of founders’ tangible resources in founding new ventures 15
- The bootstrapping-bricolage interface 37
- 3 Effectuation and entrepreneurial finance 55
- 4 Portfolio entrepreneurs: The role of risk 75
-
Part II: The inner circle
- Introduction 89
- 5 Informal financing of entrepreneurs 91
- 6 Funding entrepreneurs within business groups: An emerging market view 107
- 7 How business incubators and accelerators finance startups 119
-
Part III: The wider world
- Introduction 137
- 8 Formal debt as a source of entrepreneurial finance 139
- 9 Microfinance and entrepreneurial finance: A review and future research agenda 153
- 10 Venture capital as a source of entrepreneurial finance 171
- 11 Corporate venture capital: A literature review and research agenda 195
- 12 The role of business angels in the new financial landscape 223
- 13 Government financing of startups 245
- 14 Family offices as startup investors: A synergetic relationship of the old and new economy? 265
-
Part IV: Emerging perspectives
- Introduction 291
- 15 A scoping review of most influential entrepreneurial finance studies in developing countries 293
- 16 Conceptualizing gender in entrepreneurial finance: Past trends, current developments and future opportunities 317
- 17 Indigenous entrepreneurial finance: Mapping the landscape with Canadian evidence 335
- 18 Financing entrepreneurs in post-conflict and disaster zones 359
- 19 Ethics and entrepreneurial finance 375
- Conclusion 391
- List of figures 401
- List of tables 403
- Index 405
