While government-funded research is an important component in an innovative economy, particularly at the more basic levels, most innovation in advanced economies is funded by the private sector. Within the private sector, a large portion of research is conducted by established companies, while a smaller but arguably more innovative amount of research is conducted by small, knowledge-intensive
... [Show full abstract] companies. This Chapter focuses on the challenges of financing a subgroup of these companies, knowledge-intensive startups, which have historically been a significant source of new innovations and job growth. It begins with a discussion on how startup firms are financed in developed economies and then examines specific issues with promoting high-risk financing in emerging markets.