This survey reviews the growing body of academic work on venture capital. It lays out the major data sources used. It examines the work on venture capital investments in companies, looking at issues of selection, contracting, post-investment services and exits. The survey considers recent work...

We examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment...

The importance of an investor's organizational structure is increasingly recognized in modern finance. This paper examines the role of banks in the US venture capital market. Theory suggests that unlike independent venture capital firms, banks can seek complementarities between their venture...

We examine a unique dataset of Dutch companies, some of which have received venture financing. The data include detailed information on innovation activities and other company characteristics. We analyse the role of venture finance in influencing innovation strategies. We find that venture...

We develop a new theory of the firm where asset owners sometimes want to change partners ex-post. The model identifies a fundamental trade-off between (i) a "displacement externality" under non-integration, where a partner leaves a relationship even though the benefit is worth less than the loss...

Novel early stage ideas face uncertainty on the expertise needed to elaborate them, which creates a need to circulate them widely to find a match. Yet as information is not excludable, shared ideas may be stolen, reducing incentives to innovate. Still, in idea-rich environments inventors may...

This paper examines the division of founder shares in entrepreneurial ventures, focusing on the decision of whether or not to divide the shares equally among all founders. To motivate the empirical analysis we develop a simple theory of costly bargaining, where founders trade off the simplicity...

This paper examines the impact of government-sponsored venture capitalists (GVCs) on the success of enterprises. Using international enterprise-level data, we identify a surprising non-monotonicity in the effect of GVC on the likelihood of exit via initial public offerings (IPOs) or third party...

This paper examines the effect of investor power in a model of staged equity financing. It shows how the usual effect where market power reduces valuations can be reversed in later rounds. Once they become insiders, powerful investors may use their market power to increase, not decrease...

This paper develops a theory of how angel and venture capital markets interact. Entrepreneurs first receive angel then venture capital funding. The two investor types are 'friends' in that they rely upon each other's investments. However, they are also 'foes', because at the later stage the...