Financing Ventures
نویسندگان
چکیده
The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, VCs provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., the average cash-on-cash multiple and statistics by funding round concerning the success rate, failure rate, investment rate, equity shares, and the value of an IPO. Raising capital gains taxation reduces growth and welfare.
منابع مشابه
Financing Risk and Bubbles of Innovation∗
New ventures that commercialize radical technologies tend to cluster in time. Funding for new ventures also ebbs and flows, often synchronous with significant innovations. We suggest that financial market activity is not purely a response to novel technologies but rather, financial markets drive innovation bubbles. We show that financing risk is inherent to the funding of new ventures, but vari...
متن کاملThe Role of Patents for Venture Capital Financing
This paper investigates how patent applications and grants held by new ventures improve their ability to attract venture capital (VC) financing. We argue that investors are faced with considerable uncertainty and therefore rely on patents as signals when trying to assess the prospects of potential portfolio companies. For a sample of VC-seeking German and British biotechnology companies we have...
متن کاملTo Be Financed or Not - The Role of Patents for Venture Capital Financing
This paper investigates how patents held by new ventures affect their ability to attract venture capital (VC) financing. For a sample of VCseeking German and British biotechnology companies we have identified all patents filed at the European Patent Office. We find that in the presence of patent applications, VC financing occurs earlier. Our results suggest that VCs pay attention to patent qual...
متن کاملNetwork Ties, Reputation, and the Financing of New Ventures
Explaining how entrepreneurs overcome information asymmetry between themselves and potential investors to obtain financing is an important issue for entrepreneurship research. Our premise is that economic explanations for venture finance, which do not consider how social ties influence this process, are undersocialized and incomplete. However, we also argue that organization theoretic arguments...
متن کاملPutting Money Where the Mouths Are: The Relation Between Venture Financing and Electronic Word-of-Mouth
E xternal financing is critical to ventures that do not have a revenue source but need to recruit employees, develop products, pay suppliers, and market their products/services. There is an increasing belief among entrepreneurs that electronic word-of-mouth (eWOM), specifically blog coverage, can aid in achieving venture capital financing. Conflicting findings reported by past studies examining...
متن کامل