Venture Capitalists hold extensive control rights over entrepreneurial companies, including the right to fire the entrepreneurs with little severance. I examine why, and under what circumstances, entrepreneurs would voluntarily choose to relinquish control. I show that control may be necessary...

In their 1981 model, Stiglitz and Weiss demonstrated that there may be credit rationing in markets with adverse selection. Work by Cho and DeMeza and Webb has subsequently shown that rationing would disappear in the 1981 model if entrepreneurs seek funds on an equity market, rather than on a...