Indulgent Angels or Stingy Venture Capitalists ?

Dima Leshchinskii
Additional contact information
Dima Leshchinskii: HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales

Working Papers from HAL

Abstract: This paper studies entrepreneurs' choice of investors, who must provide financial capital and effort for projects with externalities. Venture capitalists (VCs) and individual investors (angels) compete to finance the projects. VCs seek to invest into a portfolio of projects, while angels have more slack in how much they invest into one project. In the presence of externalities between projects, VCs can potentially increase the total value of their investment portfolio through better coordination of investment, while some angels behave indulgently and give more financial investment than necessary, earning zero profits in equilibrium. Surprisingly, externalities do not give VCs as much of an advantage as one would expect. Quite often VCs lose out to angels even when this means that some projects will not receive an optimal amount of effort. In the projects they invest in, VCs always make strictly positive profits despite the competition.

Keywords: investment choice; venture capitalist; angel; project financing (search for similar items in EconPapers)
Date: 2002-11
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published in 2002

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00592022

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().