Bargaining with Venture Capitalists when Bank Financing is an Endogenous Option

In this theoretical paper, I examine bargaining over the financial terms of a contract between an entrepreneur willing to realize a project and a supportive financier such as a venture capitalist. I study the impact of the endogenous opportunity to resort to non-supportive financiers such as banks as an alternative to the supportive financier on the outcome of the negotiation. I show that the entrepreneur's personal wealth, even when it is not dedicated to the project, is crucial in determining the outcome of the negotiation.