Engineering a Venture Capital Market: Lessons from the American Experience‪.‬

INTRODUCTION The venture capital market and firms whose creation and early stages were financed by venture capital are among the crown jewels of the American economy. Beyond representing an important engine of macroeconomic growth and job creation, these firms have been a major force in commercializing cutting-edge science, whether through their impact on existing industries as with the radical changes in pharmaceuticals catalyzed by venture-backed firms' commercialization of biotechnology, or by their role in developing entirely new industries as with the emergence of the Internet and World Wide Web. The venture capital market thus provides a unique link between finance and innovation, providing start-up and early stage firms--organizational forms particularly well-suited to innovation--with capital market access that is tailored to the special task of financing these high-risk, high-return activities. (1)