Abstract
This paper presents the results of the study on the venture capital (VC) market development drivers in small countries with underdeveloped VC markets. Based on the literature content analysis, the authors developed a comprehensive list of factors influencing VC market status. The relevance of the factors in countries with small, underdeveloped VC markets was studied between experts involved in shaping Latvian VC market. The study revealed that all factors (in total 73) delivered from the literature influence the VC market in the countries such as Latvia. Sixty-three factors have an impact above moderate, and providing public funding for VC funds is only one of the factors. The results highlight the importance of the shift from the typical public support approach of providing VC managers with funding to the government involvement in also shaping other conditions necessary for VC market self-sufficiency development. Based on the study, the authors propose a conceptual model for further public support design. The model has three dimensions of meta factor groups (VC market participants, environment, embedded characteristics). It is necessary to evaluate and, if possible, provide public support in each of the meta-factors’ groups. The authors propose to use the model and the list of impactful factors as tools for further governmental support for VC.
Highlights
Effective Venture Capital MarketCompanies with stable income, a proven track record, and assets pledge to have access to various sources of capital [1]
The meta-factor group “venture capital (VC) market participants” had three factor groups: q11 factors related to VC firms, q12 factors related to investors in VC funds, and q13 factors related to entrepreneurs
The factors related to the “investors in VC funds” or limited partners (LPs), like the “factors related to VC firms”, have a larger influence on the supply and total market activity than the demand side
Summary
A proven track record, and assets pledge to have access to various sources of capital [1]. New ventures, especially high-tech and/or those with high growth potential, usually lack these features and often are not eligible for typical funding such as bank loans [2]. It is well-known [3,4] that for such companies, venture capital (VC) is the most appropriate financial instrument to use. The European Union (EU) alone has many policy documents in regards to VC [13] and over several decades, has contributed a significant amount of money to support VC funds [14]
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