Work

Financing J-curves in venture capital

Year: 2026

Type: article

Abstract: Startups face a trade-off between short-term profitability and long-term growth. Their cash flows are said to follow a so-called J-curve. The shape of the curve depends on investors’ financing capacity: their ability to sustain prolonged periods of negative cash flow. US venture capitalists are often believed to have greater financing capacity. We examine a large Swedish dataset with detailed cash flow information. Swedish startups backed by US venture capitalists experience deeper J-curves, with larger short-term losses and higher long-term sales, relative to those backed by non-US venture capitalists. These results are consistent with US venture capitalists having greater financing capacity: they can provide more funding directly and have better access to later-stage investors.

Source: Review of Finance

DOI: 10.1093/rof/rfag037

Authors: Thomas Hellmann, Alexander Montag, Joacim Tåg

Institutions: University of Oxford, European Corporate Governance Institute, University of Warwick, Research Institute of Industrial Economics, Hanken School of Economics

Language: English

Topic: Private Equity and Venture Capital

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,431