Abstract
This paper presents an industry life cycle model of venture capital (VC) and associated startup-intensive high-tech clusters based on the Israeli experience of the last 35 years. Throughout, VC is considered as a new industry, which, when successful, traverses five phases: background conditions, pre-emergence, emergence, restructuring and consolidation. Each phase comprises a number of events and processes, including policy ones. A central process is VC emergence—a cumulative, self-reinforcing process involving a number of interrelated sub-processes. A central sub-process in the Israeli case was VC-startup co-evolution, which was the critical link between the VC emergence and the transformation of the high-tech cluster into a startup-intensive configuration. Our analysis suggests that, provided appropriate background conditions prevail, VC could be central vector in the transformation of existing high-tech clusters.
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