Assessing the maximum expendable quota for a milestone financing provided by a venture capitalist

Thomas Hering, Christian Toll and Polina K. Kirilova

International Journal of Entrepreneurial Venturing, 2016, vol. 8, issue 1, 102-117

Abstract: In the expansion phase, young ventures often face a financing bottleneck. Initial company owners seek equity partners, usually in their (extended) network. In this paper, we demonstrate how the state marginal quota model under realistic imperfect market conditions can assist company founders striving for venture capital financed growth in the expansion phase. Applying this model, initial company owners can determine the maximum expendable percentage of ownership for a given milestone financing. This paper also shows that under unrealistic perfect market conditions, there is no apparent reason for venture capital to exist.

Keywords: business valuation; venture capital; entrepreneurial business; expansion phase; investment; milestone financing; capital dilution; imperfect markets; state marginal quota model; maximum expendable quota; young ventures; financing bottleneck; entrepreneurship. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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