One-third of venture capital in Europe comes from government agencies. We study how government-backed VC, intermediated through private funds, affects firm and market outcomes. Matching EIF portfolio data to firm outcomes, we find that government financing boosts firm growth, especially when targeting young companies, and attracts private co-investment rather than crowding it out. Current policy, however, appears to favor older, later-stage “scale-ups.” We are developing a structural model to evaluate the impact of counterfactual allocation policies on venture capital flows and firm growth across Europe’s diverse financial markets.…Read More