The Dynamics of Venture Capital Contracts

Julia Hirsch and Carsten Bienz

FMG Discussion Papers from Financial Markets Group

Abstract: We analyze the degree of contract completeness with respect to staging of venture capital investments using a hand-collected German data set of contract data from 464 rounds into 290 entrepreneurial firms. We distinguish three forms of staging (pure milestone financing, pure round financing and mixes). Thereby, contract completeness reduces when going from pure milestone financing via mixes to pure round financing. We show that the decision for a specific form of staging is determined by the expected distribution of bargaining power between the contracting parties when new funding becomes necessary and the predictability of the development process. To be more precise, parties choose the more complete contracts the lower the entrepreneur's expected bargaining power - the maximum level depending on the predictability of the development process.

Date: 2005-12
New Economics Papers: this item is included in nep-bec and nep-ent
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/dp552.pdf (application/pdf)

Related works:
Journal Article: The Dynamics of Venture Capital Contracts (2011)
Working Paper: The dynamics of venture capital contracts (2005)
Working Paper: The dynamics of venture capital contracts (2005)
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:fmg:fmgdps:dp552

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().