Do Development Financial Institutions Create Impact through Venture Capital Investments?
Organized by the Private Sector Development Research Network
Hosted by the International Finance Corporation (IFC)
Friday, 27th of June 2025 from 9-10am EDT
LINK TO JOIN WILL BE HERE SHORTLY
ABOUT THE SEMINAR
This seminar will discuss important research that addresses our understanding of Development Finance Institutions’ venture capital investment activities and their actual impact on economic development. While DFIs collectively manage over $23 trillion in assets and have significantly increased their VC investments over the past three decades, empirical evidence on whether they create meaningful impact through these investments has remained limited.
The paper examines the investment activities of 344 DFIs across 57 countries, analyzing 2,770 VC funds and 33,106 deals from 1995 to 2021. The research reveals that despite their stated mandates to build VC ecosystems, support entrepreneurship, foster innovation, and promote sustainable business practices, DFIs create impact in some aspects but have significant room for improvement. The study shows that DFIs are less likely than conventional VC investors to support young funds or early-stage deals, and that DFI-backed firms grow similarly to conventionally-backed firms in terms of profitability, employment, patenting, and sustainability, while having fewer follow-on investments from conventional VCs.
The discussion will cover findings on differences between DFI performance in developed versus developing economies. In developing economies, DFIs are more likely to target industries with positive externalities, provide capital to underrepresented fund managers, and improve return transparency, though their overall impact remains limited. In developed economies, there is even more limited evidence that DFIs address market failures.
Complete paper can be found here.
ABOUT THE SPEAKER
Paul Smeets
Professor of Philanthropy and Sustainable Finance, University of Amsterdam
Dr. Smeets is a Professor of Philanthropy and Sustainable Finance at the University of Amsterdam. His research explores what drives individuals to invest their time and resources in ways that benefit society, with a focus on identifying the most impactful ways to use these resources.
Dr. Smeets conducts large-scale field experiments and surveys with financial institutions and charities globally, linking these data to real-world investment choices. His research samples include retail investors, pension fund members, and millionaires. With support from his Vidi grant from the Dutch Research Council, he investigates the beliefs and sustainable investment behavior of professional investors.
He holds a PhD in Finance from Maastricht University and has published extensively in top-tier journals including The Review of Financial Studies, The Journal of Finance, and Proceedings of the National Academy of Sciences. His work employs rigorous methodologies including field experiments with industry partners and linking surveys to archival data to understand how financial decision-making can be directed toward socially beneficial outcomes.
Learn more about Dr. Smeets’ research here.