A Probabilistic Theory Of Entrepreneurial Financing

Edmund Mantell
Additional contact information
Edmund Mantell: Department of Finance, Lubin School of Business, Pace University

Annals of Economics and Finance, 2008, vol. 9, issue 1, 177-197

Abstract: This paper develops a theory of the entrepreneurial financing by venture capitalists. It focuses on the activities of the entrepreneur at the incipiency of the investment process: namely the solicitation event. The temporal series of financial commitments elicited from venture capitalists are assumed to have the characteristics of random variables. It is shown that the aggregate capital commitment secured by an entrepreneur in a finite time has stochastic properties corresponding to those of a statistical renewal process. The paper derives limiting conditions on the probability that entrepreneur¡¯s project will be aborted because of his failure to secure adequate funding commitments in a finite time. The entrepreneur¡¯s attitude towards risk determines the tradeoff between the expected aggregate capital commitment and the risk of abortion of the project.

Keywords: Entrepreneurial solicitations; Venture capital financing; Stochastic processes; Probability of entrepreneurial insolvency (search for similar items in EconPapers)
JEL-codes: G24 G31 G32 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://aeconf.com/Articles/May2008/aef090108.pdf (application/pdf)
http://down.aefweb.net/AefArticles/aef090108.pdf (application/pdf)

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:cuf:journl:y:2008:v:9:i:1:p:177-197

Access Statistics for this article

Annals of Economics and Finance is currently edited by Heng-fu Zou

More articles in Annals of Economics and Finance from Society for AEF Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().