Developmental venture capital is the financing of businesses with equity and near-equity in order to achieve both social and financial objectives. The social returns include economic development of distressed urban and rural geographies; creation of high-quality jobs for low-income populations; building wealth for women and people of color; and creation of products that benefit society, such as those that lower poverty or contribute to a cleaner environment. This article introduces a conceptual framework for the developmental venture capital industry based on the social objectives of individual funds. The framework distinguishes between funds that have corrective versus additive objectives. Funds with corrective objectives are designed to address inadequate access to traditional venture capital by specific geographies and populations. Funds with additive objectives are meant to further specific social goals, such as fighting poverty or environmental degradation. This framework further differentiates between two forms of corrective venture capital, based on the capital access obstacles that each is trying to address and whether the resulting economic models require subsidy.
All Science Journal Classification (ASJC) codes
- Community development venture capital
- Developmental venture capital
- Public venture capital
- Social entrepreneurship
- Social venture capital