What Do Economists Tell Us About Venture Capital Contracts?
Journal
Journal of Economic Surveys
Type
journal article
Date Issued
2007
Author(s)
Abstract
© 2007 The Author Journal compilation © 2007 Blackwell Publishing Ltd. Venture capital markets are characterized by multiple incentive problems and asymmetric information. Entrepreneurs and venture capitalists enter into contracts that influence their behaviour and mitigate the agency costs. In particular, they select an appropriate kind and structure of financing and specify the rights as well as the duties of both parties. The typical features of venture capital investments are an intensive screening and evaluation process, active involvement of venture capitalists in their portfolio companies, staging of capital infusions, use of special financing instruments such as convertible debt or convertible preferred stock, syndication among venture capitalists or limited investment horizon.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Volume
21(1)
Start page
65
End page
89
Pages
24
Subject(s)
Division(s)
Eprints ID
259436