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 a simple partial equilibrium model to investigate the effects of government policy on venture capital backed investments. Giving up an alternative career, entrepreneurs focus their effort on a single, high risk venture each. Venture capitalists acquire an equity stake and...