Economic geography receives limited consideration in the venture capital literature. This study utilizes thirty years of data concerning companies that initially were backed by venture capital. These firms are located in Entrepreneurial Focal Points in the United States, namely: California,...

The paper offers a new explanation for the widely observed use of redeemable and convertible preferred stock in venture capital finance. Redeemable and convertible preferred stocks can be used to endogenously allocate cash flow and control rights as a function of the state of nature, the...

The paper presents an adverse selection-based explanation of the fact that some entrepreneurs choose to finance multiple projects together by issuing a single security and other entrepreneurs decide to finance each project separately. We consider the financing problem of an entrepreneur who has...

This paper develops a model to explore how adverse selection and search frictions affect the allocation of venture capital. Entrepreneurs have private information about their projects' quality and compete in a search market to attract investors. The combination of low capital supply and...

This paper presents a theory for Islamic venture capital namely ‘Mudharabah' contract under adverse selection problem. In order to avoid selecting a low type entrepreneur for a given good project, the framework defines the profit sharing ratio (PSR) as a screening device. We then develop a...

In this paper we construct a model in which entrepreneurial innovations are sold into oligopolistic industries and where adverse selection problems between entrepreneurs, venture capitalists and incumbents are present. We show that as exacerbated development by better-informed venture-backed...

Venture Capital (VC) has emerged as the dominant source of finance for entrepreneurial and early stage businesses, and the Indian VC industry in particular has clocked the fastest growth rate globally. Academic literature reveals that VC funded companies show superior performance to non VC...

If control of their firms allows entrepreneurs to derive private benefits, it also allows other controlling parties. Private benefits are especially relevant for venture capitalists, who typically get considerable control in their portfolio firms, but not for banks, which are passive loan...

The conventional wisdom is that entrepreneurs seek financing for their high-growth, high-risk start-up companies in a particular order. They begin with friends, family, and bootstrapping. Next they turn to angel investors, or accredited investors (and usually ex-entrepreneurs) who invest their...

This paper studies the effect of business partners on the commercialization of invention-based ventures, and it assesses the relative importance of the complementary skills, contacts, and financial capital that these partners may add to the original inventor-entrepreneur. Projects run by...