Assessing the Impact of Public Venture Capital Programs in the United Kingdom: Do Regional Characteristics Matter?

Abstract

Over the last two decades, many governments around the world have implemented programs to mobilize venture capital (VC) in support of new and innovative firms. In this paper, we analyze whether and how the impact of publicly-supported VC funds varies between high-tech and low-tech regions, when compared to private VC funds. Our analyses on a sample of 898 VC-backed companies in the United Kingdom in the period 1998-2007 show for public VC funds: (a) a greater propensity to invest in early-stage and technology-based sectors, which is especially pronounced in low-tech regions; (b) a greater propensity toward staging and a greater ability to attract partners in syndication, especially in high-tech regions; (c) lower exit rates of investee companies, in terms of IPO/acquisition, as compared to private VC funds. Overall, our findings confirm that regional characteristics do matter if we want to more rigorously assess the effectiveness of public VC programs.