Venture capital and the financial crisis

Venture capital investment has developed throughout the years as an important financial intermediary for start-up firms. Notwithstanding its fundamental role, the effects of an economic crisis on venture capital have not been widely explored within contemporary scientific research. The primary focus of this research is to analyze the effects of the financial crisis on the level of syndication and the investments of independent, institutional, public, corporate and financial venture capital firms. In addition, differences in the effects of the financial crisis between the United States and European venture capital industries are explored. The results show that the level of syndication decreases due to the financial crisis in both the United States and Europe. Furthermore, during the crisis, the level of syndication tends to be higher in the European venture capital industry. Although institutional and financial venture capital firms rely more on the IPO market, the results indicate that they are affected less by the crisis. When comparing the effects of the financial crisis between the United States and European venture capital firms, this research shows that the United States venture capital industry saw more negative effects from the financial crisis.