Bridging the equity funding gap in technological entrepreneurship: the case of government-backed venture capital in China

China has aspired to overhaul its growth model by vigorously promoting technological innovation and entrepreneurship. Like many other countries, however, a funding gap constrains new and technology ventures in the early stage of venture development. To address this challenge, China has used government-backed venture capital as an important means to plug the gap. Four super-sized central government backed venture capital guiding funds (VCGFs) have been set up and dozens of similar schemes are in operation at the local levels. Framed in the mould of the Yozma model, fund-of-funds and co-investment have been the dominant models to leverage private VC investments. This chapter provides a case study of government-backed venture capital schemes in China. It sets out to document the background conditions that explain the country’s need for public venture capital, to describe the distinct features of programme design in such schemes, and to tentatively assess the impact of government-backed venture capital.