The Determinants of Private Equity and Venture Capital Fundraising in Brazil

Abstract

The positive impact of the Private Equity and Venture Capital (PE/VC) investments in the economy and in the capital markets is widely documented in the international literature. However, studies about the determinants of PE/VC fundraising are relatively scarce and their results are far from being unanimous. Notwithstanding the fast growing importance of the PE/VC industry to the Brazilian economy, several answers that intrigue both academia and practitioners remain unknown. This paper sheds a light on one of the most critical questions in the PE/VC industry: what are the determinants of PE/VC fundraising in Brazil? At the best of my knowledge, it is the first study about which variables drive investor’s allocation in this asset class in Brazil. Based on a supply-and-demand model of PE/VC funds described by Gompers and Lerner (1998), I empirically test the determinants of the PE/VC activity in Brazil. I use a unique database for an industrywide and a firm level analysis, and my findings are in line with several empirical results worldwide. I show that interest rates, stock market returns, IPO activity level, industry’s regulation and investors’ taxation have impact on the Brazilian PE/VC fundraising activity.