The role of interest rates in shaping venture capital dynamics and IPO valuations

Over the past two decades, the relationship between interest rates, the venture capital (VC) industry and initial public offerings (IPOs) has become an increasingly relevant and researched topic in the financial literature. This thesis explores how interest rates impact venture capital fundraising, entrepreneurial financing choices and the broader investment landscape. Particular attention is given to the relationship between monetary policy and financial market cycles, as well as the risks associated with prolonged periods of low interest rates, including speculative bubbles and market instability. The research also considers how shifting to a higher-rate environment affects IPO valuations and investor sentiment. By analysing these dynamics, the research aim is to explore the broader influence of interest rate changes on innovation, economic growth and financial stability. Understanding this interplay is essential for policymakers, investors and market players navigating the complex financial landscape.