Financing early-stage ventures: the role of uncertainty and financial markets in the investment choices of venture capitalists

Eric Nasica (1) , Dominique Dufour (2)

1 GREDEG - Groupe de Recherche en Droit, Economie et Gestion
2 CRIFP - Centre de Recherche en Ingénierie Financière et Finances Publiques

Our paper sheds light on the reasons for which a rational venture capitalist decides to reallocate his or her portfolio from later to early-stage investment. We explain why, during certain periods, there is a strong correlation between the performance of financial markets and the funds invested in early-stage ventures while, during other periods, the performance of financial markets does not affect such investments. Some hypotheses inferred from our theoretical model, and notably the existence of successive periods of “easy financing” and “lasting rationing” for early-stage firms in the United States venture capital industry, are tested and empirically validated.

Mots clés: venture capital; early stage financing; rationality; uncertinty; financial markets; confidence

Domaines: Economies et finances

Eric Nasica, Dominique Dufour. Financing early-stage ventures: the role of uncertainty and financial markets in the investment choices of venture capitalists. 2009. ⟨halshs-00466571⟩