Serving Local Yet Achieving Opposite Outcomes? Governmental Venture Capital’s Localization Strategy and Start-up Staged Financing

Serving Local Yet Achieving Opposite Outcomes?

Governmental Venture Capital’s Localization Strategy and Start-up Staged Financing

HAO Bin¹ZHANG Shiyun^1,* NA Yubei¹

(1.Xi’an Jiaotong-Liverpool University, Suzhou Jiangsu, 215123）

Abstract: To improve governmental venture capital (GVC)’s function of serving regional development, regional governments have a strong motivation to set up a threshold of local investment ratio, which refers to the ration of local investment to the total size of fund. In this study, we investigate how local investment ratio affects the hazard of start-ups receiving staged financing. We argue that the set-up of local investment ratio can be harmful to GVC’s development of risk management capability which in turn, brings about negative impact to start-up’s staged financing. Drawing on data of China’s GVC investments, our empirical analyses show that: (1) GVC’s local investment ratio negatively affects start-up’s staged financing; (2) Early investor strengthens the negative relationship between local investment ration and start-up’s staged financing; (3) Syndication weakens the negative relationship between local investment ration and start-up’s staged financing; (4) GVC investment concentration also weakens the negative relationship between local investment ration and start-up’s staged financing.

Key words: Governmental venture capital; Local investment ratio; Start-up; Staged financing

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