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Licensed Unlicensed Requires Authentication Published by De Gruyter 2022

13 Government financing of startups

From the book De Gruyter Handbook of Entrepreneurial Finance

  • 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.

© 2022 Walter de Gruyter GmbH, Berlin/Boston
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