The Catalysing Effect of Public Fund-of-Fund Investments
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
The amount of public money invested in the venture capital industry has increased sub-stantially over the last few decades. The goal is, in general, to facilitate growth in highly in-novative small and medium sized enterprises (SMEs) by securing their supply of capital in early stages. Hence, an important aspect of the effectiveness of public investment is wheth-er it increases the investees’ ability to attract additional funding. The process through which public investments can contribute to a better supply of capital to SMEs by more than just their own investment is commonly known as the catalysing or leverage effect of public in-vestment.
In order to increase understanding of how this effect can be maximized, this study com-pares the amount of capital attracted to Swedish SMEs as a result of public fund-of-fund (FoF) investment to that of direct public investments.
This study shows that:
- FoFs are more effective in increasing the capital supply to SMEs in the market.
- Public investments have a higher catalysing effect on the fund level than on the enterprise level. Hence, EUR 1 invested at the fund level has a larger positive impact for SMEs than EUR 1 invested at the enterprise level.
- The investment quality of private venture capital (VC) investments is generally higher than that of direct public investments. Hence, FoFs allows public inves-tors to "free ride" on the skills of private VCs rather than setting up own struc-tures.
Place, publisher, year, edition, pages
1992. , 49 p.
Fund-of-Funds, Public investments, Venture Capital, European Investment Fund
riskkapital, offentliga investeringar, regionala fonder
IdentifiersURN: urn:nbn:se:hj:diva-27436ISRN: JU-IHH-NAA-2-20150039OAI: oai:DiVA.org:hj-27436DiVA: diva2:825731
Subject / course
Manduchi, Agostino, Professor