Screening model for the support of governmental venture capital

Governmental venture capital (GVC) represents one form of public interven- tion aimed at alleviating market failures linked to the undersupply of finance to early-stage high-tech firms. However, public sector efforts to promote venture capital activity are not free of limitations and inconclusiveness. Literature has indicated the design of a more effective and efficient investment selection process of GVC as a key driver of the success of public programs; nevertheless, few studies have explicitly focused on the selection processes of GVCs. This exploratory paper does so by concentrating on the screening phase in particular. In the early stages of the investment selection process it is critical that (a) decisions are guided by a clear objective function of GVC and (b) they pick up only a subset of promising ventures on the basis of a selected number of easily applicable criteria. Based on an empirical analysis of growth determinants of a set of New Technology-Based Firms, we build a predictive model of target screening for an effective implementation of the investment strategy that meets the objectives of GVCs. We show the results of its application and discuss implications for both theory and GVC practice.