Venture capital has offered a way to combine funding of high-risk projects, and managerial support, in a flexible way for new and innovative firms. Established firms in the IT sector, but also in other industries, have increasingly relied on public equity and on debt instruments incorporating equity  BIS Review 10/2002  1  characteristics.
Examples are convertible bonds, issuance in the high yield segment of the bond market, coupon step-up clauses, or bank loans which link the credit spreads charged to a borrower’s actual performance. One observation relevant for public policy is the importance of venture capital for the development of new industries.