Emerging growth companies are always eager for capital to finance growth. Capital in the monetary sense is in the forefront of every entrepreneur’s mind when it comes to seeking funding from venture capital and private equity investors. And for good reasons. Without the necessary capital, it is hard for an enterprise to build up its business. For any business to grow, it needs to hire the right...

Building on Dixit & Pindyck (1994) model for determining investment timing, this paper develops a real options framework to understand how and when Entrepeneurs seek for Venture Capital financing. The setting comprises an established start-up firm which is deciding between a small and a large expansion project. The Entrepeneur will be seeking Venture Capital financing to carry a larger expansio...

venture capital, corporate research, research management, management best practices Research and development organizations in established enterprises can become more effective by leveraging products and learnings from venture funded companies, and from adopting some of the management practices of venture fund managers and start-ups managed by a venture capitalist. Corporate research continues t...

The paper explores factors that influence the design of financing contracts between venture capital investors and European venture capital funds. 122 Private Placement Memoranda and 46 Partnership Agreements are investigated in respect to the use of covenant restrictions and compensation schemes. The analysis focuses on the impact of two key factors: the reputation of VC-funds and changes in th...

A characteristic feature of venture capital funding is its staged structure. Startup firms do not receive all the funding they need to achieve profitability in their first round of venture funding. Rather venture capitalists invest in stages and their investment today does not commit them to future funding. The theoretical literature has examined this feature of venture capital investments beyo...

This study investigates the predictability of firm values for venture capital-backed firms. Having insights into the internal documents of more than 300 venture capitalists, we derive three common categories of firm value drivers: team characteristics, firm and market characteristics, and accounting information. Based on these value drivers, we provide a regression based valuation approach, whi...

In today's venture capital market, starting a technology-based company is—to say the least—challenging. After exerting the efforts necessary to develop a compelling business plan, secure necessary intellectual property rights and build the beginnings of a management team, it might seem like the offer of investment from a venture capital firm is the deserved icing on the cake. But there's still ...

At the time of an initial public offering, shares in a firm are typically held by venture capitalists, insiders, corporate investors, and angel investors. We examine the role of angel investors in the IPO process. We find that angel investors provide equity capital in industries that venture capitalists are less likely to serve and that shareholders in angel backed IPO firms are more likely to ...

This paper examines how organizational structure affects behavior and outcomes by looking closely at the performance of different types of venture capital organizations. We find a strong positive relationship between the degree of specialization by individual venture capitalists at a firm and its success. At the same time, however, the marginal effect of increasing specialization at the firm is...

We present a new theory about underpricing and Venture Capital-backed (VC-backed) companies where the key feature is capacity constraints Venture Capital firms can take only a limited number of new projects. This model can match the evidence gathered by the empirical literature on the grandstanding hypothesis, i.e., that younger Venture Capitalists rush to Initial Public Offers (IPOs). Moreover...