This paper proposes and analyses a model of start-up investment. Innovative entrepreneurs
are commercially inexperienced and can benefit from venture capital support. Only part of
them succeed in matching with a venture capitalist while the rest must resort to standard bank
finance. We consider a number of policies to promote entrepreneurship and venture capital
backed innovation.
JEL Classification: D82, G24, G28, H24.
Keywords: venture capital bank finance, matching, moral hazard, public policy.