When and Why Do Venture-Capital-Backed Companies Obtain Venture Lending?

Tereza Tykvova

Journal of Financial and Quantitative Analysis, 2017, vol. 52, issue 3, 1049-1080

Abstract: I model the decision of an informed early-stage venture capital (VC) investor that considers involving an uninformed VC or venture lending (VL) investor to finance the late stage. Early-stage VC investors that own high-quality value companies tend to signal their quality and they frequently turn to VL investors. Early-stage VC investors prefer VC if the proportion of high-quality companies in the population is high, if their companies have a high upside potential, if they can benefit from the value that late-stage VC investors add, or if uncertainty is high. I find empirical evidence consistent with these predictions.

Date: 2017
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