Are start-ups funded by public venture capital different? New cross-country evidence from micro-data

Given the sizeable amount of public investments in venture capital (VC) in many countries, an emerging empirical literature investigates the impact of government venture funds on firm performance. We reassess the key findings of this literature using a new database on innovative start-ups and VC investments, which is unprecedented for granularity and comprehensiveness and covers a longer, more recent time period. Our analysis confirms the established finding that start-ups backed by government VC underperform start-ups backed by private investors. Differently from the extant literature, instead, we do not find that mixed public–private investments in the first stage are associated with additional private investments in later funding rounds. We interpret this as evidence that public VC is bounded to fail without an ongoing commitment throughout the process of development and growth of new ventures.