Frimpong, Akwaa-Sekyi, Sackey, and Saladrigues Sole examine how Spanish venture capital fundraising relates to stock market returns and market capitalization using time-series data spanning 1989 to 2020, motivated by how the global financial crisis constrained traditional equity funding and pushed the market toward more innovative risk capital financing methods. Using a vector error correction model following cointegration testing, the authors find short-run and long-run causal relationships between VC fundraising and stock market returns when either is treated as the dependent variable, but no such relationship emerges when market capitalization is used as the dependent variable, suggesting VC fundraising and stock returns are tightly linked while market capitalization behaves more independently. The study also finds Spanish VC funds raise capital from a genuinely diversified mix of geographic and institutional sources, a pattern the authors interpret as supporting risk diversification theory in venture financing, and conclude that alternative, innovative equity risk capital financing methods can meaningfully spur economic growth, particularly relevant for economies recovering from a financial crisis.

Investors and policymakers in Spain and similar mid-sized European markets get an empirically grounded picture of how VC fundraising actually connects to broader public market conditions, useful for anticipating how VC capital availability might respond during future downturns based on how stock market returns behaved during and after the last financial crisis. The finding that VC fundraising links closely to stock returns but not market capitalization is a useful, specific distinction for LPs and fund managers modeling fundraising cycles, since it suggests return trends rather than aggregate market size are the more relevant macro signal to watch when timing a new fund launch in this market. The evidence that Spanish VC funds draw capital from diversified geographic and institutional sources is a useful data point for emerging fund managers in similar smaller VC markets, suggesting that building a genuinely diversified LP base, rather than relying heavily on one region or investor type, is both achievable and consistent with how successful funds in this market have historically raised capital.