The existing literature in both public economics and financial economics often fails to consider how appropriate and effective public policy may be in promoting the venture capital industry. Public economics has dealt extensively with the effect of taxes and subsidies but has neglected the...

This paper proposes and analyses a model of start-up investment. Innovative entrepreneurs are commercially inexperienced and can benefit from venture capital support. Only part of them succeed in matching with a venture capitalist while the rest must resort to standard bank finance. We consider...