Venture Capital: the "Ferment" of the Economy

Abstract

Small and medium size companies, as well as new companies, are crucial for the economic
growth. In general they face financing problems, mainly because they do not have a long credit
track record to show, and information assimetry issue. Sometimes debt is not the most adequate way to finance new companies, because of the risk involved and the lack of real assets. The role of venture capital, in its different stages (angels investors, seed money, venture capital, private equity) and the creation of capital funds industry is crucial for growth and development. Through a favorable legislation, and the appropiate use of tax incentives, to stimulate the venture capital funds industry, governments are able to enhance entrepreneurship, promote qualified employment and accelerate economic growth.