This Paper evaluates the ability of venture capital funds to identify and bring to market successful high-tech Israeli companies during the period 1991 to 2000. Using a newly constructed and highly detailed database we find that: (1) The probability of survival until the IPO stage is higher for...

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...

This paper offers a new explanation for the prevalent use of convertible securities in venture capital finance. Convertible securities can be used to endogenously allocate cash flow rights as a function of the realized quality of the project. This property can be used to mitigate the double...

We claim that the stock market encourages business creation, innovation, and growth by allowing the recycling of ‘informed capital’. Due to incentive and information problems, start-ups face larger costs of going public than mature firms. Sustaining a tight relationship with a monitor (bank,...

This Paper presents the first model where entry deterrence takes place through financial rather than product-market channels. In standard models of the interaction between product and financial markets, a firm's use of financial instruments deters entry by affecting product market behaviour,...

Why do some start-up firms raise funds from banks and others from venture capitalists? To answer this question, I study a model in which the venture capitalist can evaluate the entrepreneur’s project more accurately than the bank but can also threaten to steal it from the entrepreneur. The...

This Paper compares the financing of new ventures in start-ups (entrepreneurship) and in established firms (intrapreneurship). Intrapreneurship allows established firms to use information on failed intrapreneurs to redeploy them into other jobs. Instead, failed entrepreneurs must seek other jobs...