Fostering Venture Capital in the Context of Economic Crisis

Kovács, O. (2011): Fostering Venture Capital in the Context of Economic Crisis.  News of the Month, ICEG European Center, December 2010-January 2011 pp. 4-7.

Our starting point in this article is the well-documented fact that venture capitalists’ (VCs) behaviour has become predominantly more risk averse owing to the recent crisis. This is completely in accordance with the experience during the internet bubble in the early 2000s illustrating the VCs’ sensitivity to an economic juncture. We argue that future expectations of VCs are one of the most important factors behind this shift. It per se calls on policymakers to refrain from such interventions which are most likely to degrade positive expectations. Specifically, while the upcoming fiscal consolidations of nations are imperative, governments should eschew inadequately composed fiscal consolidations after the stimulus-prone period.