How Macroeconomics affect Venture Capital Investment Preference

The objective of this study is to examine how macroeconomic conditions and IPO’s performance affect the investment preference and behavior of venture capital. After testing US venture capital investments from 1980-2015, we find that venture capital firms invest more in early-stage companies during economic downturn associated with the financial sector. We also find that venture capital firms invest more in later-stage companies during economic downturn associated with the real sector. Moreover, venture capital firms invest more in early-stage companies when IPO market perform well.