Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn

Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn

We begin this paper by tracing the growth of the venture capital industry over the past 40 years, noting how technological and institutional changes have narrowed the focus and concentrated the capital invested by venture capital firms as well as potentially contributing to a decline in governance. We then turn to some potential adaptations to the venture capital industry model that might enable a broader base of ideas and technologies to receive risk capital. In particular, we propose some possibilities for altering what seems to be a standard and inflexible contract between venture capital funds and their investors as well as potential approaches to manage venture investments in certain industries more effectively.

Josh Lerner and Ramana Nanda

Journal of Economic Perspectives

Summer 2020

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By |2020-09-15T14:23:05-07:00January 1st, 2018|Efficiency/Growth, Intellectual Property, Political Economy, Reference, Reforms|