Venture Capital Finance: A Security Design Approach

Entrepreneurial finance: Banks versus venture capital

We analyze how entrepreneurial firms choose between two funding institution: banks, which monitor less intensively and face liquidity demands from their own investors, and venture capitalists, who can monitor more intensively but face a higher cost of capital because of the liquidity constraints that they impose on their own investors. Because the firm’s manager prefers continuing the firm over...

Trends in Venture Capital Finance in Developing Countries

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Using the Venture Capital Game to Teach Topics in Finance

The Venture Capital (VC) Game is a web-based, discrete-event simulator of a market for a single product. Students are divided into teams. In some assignments all the teams are entrepreneurs. In other assignments, some teams will be entrepreneurs and the rest will be venture capitalists. The objective of the game is to finish with the highest equity valuation. The entrepreneur teams compete agai...

Competition, Contracting, and Value Creation in Venture Capital Finance∗

We embed venture capital contracting in a search market environment where venture capitalists and entrepreneurs meet and bargain over optimal contracts. We find that both the composition and type of financial claims held by the venture capitalist and entrepreneur depend critically on the underlying market structure. In some cases both parties hold a mix of debt and equity while in others only o...

Venture Capital & the Finance of Innovation Second Edition