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Government as Venture Capital Catalyst: Pitfalls and Promising Approaches

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  • Timothy Bates

    (Wayne State University)

Abstract

Former President Bill Clinton’s New Markets Initiative includes a proposal to create companies that will invest venture capital into small firms that operate in low-income areas. Important elements of this proposal are essentially recycled ideas that worked badly when implemented back in the 1970s by the U.S. Small Business Administration. This study identifies failed concepts being built into present and proposed venture-capital community development financial institutions. Concrete suggestions are offered that may circumvent building structural deficiencies into the emerging generation of community development financial institutions. In particular, these community development financial institutions need to avoid the debt financing that government is offering as an incentive to promote venture-capital financing in small businesses.

Suggested Citation

  • Timothy Bates, 2002. "Government as Venture Capital Catalyst: Pitfalls and Promising Approaches," Economic Development Quarterly, , vol. 16(1), pages 49-59, February.
    • Handle: RePEc:sae:ecdequ:v:16:y:2002:i:1:p:49-59
    DOI: 10.1177/089124240201600106
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    References listed on IDEAS

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    1. Timothy Bates, 2000. "Financing the Development of Urban Minority Communities: Lessons of History," Economic Development Quarterly, , vol. 14(3), pages 227-242, August.
    2. Ruhnka, John C. & Feldman, Howard D. & Dean, Thomas J., 1992. "The "living dead" phenomenon in venture capital investments," Journal of Business Venturing, Elsevier, vol. 7(2), pages 137-155, March.
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    Cited by:

    1. Eric Scorsone & Stephan Weiler, 2004. "New Markets as Informational Asymmetries," Economic Development Quarterly, , vol. 18(3), pages 303-313, August.
    2. Timothy Bates, 2002. "Rejoinder to Charles D. Tansey: Moving Toward a More Effective Small Business Administration," Economic Development Quarterly, , vol. 16(2), pages 185-190, May.
    3. Douglas Cumming, 2007. "Financing Entrepreneurs Better Canadian Policy for Venture Capital," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 247, April.

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