Discussion Paper

Doing Well by Doing Good? Community Development Venture Capital

Abstract: In a new working paper, Josh Lerner and I explore how the venture capital (VC) model can be harnessed to achieve socially targeted ends by examining the investment record of community development venture capital (CDVC) firms. Our results are mixed. Investments made by CDVC firms are less likely to succeed than are investments made by traditional VC firms. This lower probability of success persists even after controlling for the fact that CDVC firms invest in industries and geographies that have, on average, lower success rates. However, we do find that CDVC firms have the benefit of bringing traditional VC firms to underserved regions; controlling for the presence of traditional VC investments, we find that each additional CDVC investment draws an additional 0.06 new traditional VC firms to a region.

Keywords: Community Development; Venture Capital;

JEL Classification: G2;G3;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2012-11-21

Number: 20121121