Venture capitalists not only finance but also advise and thereby add value to young innovative firms. The prospects of venture capital backed firms thus depend on joint efforts of entrepreneurs and informed venture capitalists, and are subject to double moral hazard. In financing a portfolio of...

The relationship between a venture capitalist and an entrepreneur is modeled to investigate the impact of public subsidies on venture capital investments in start-up enterprises. In this model, the venture capitalist only finances start-up enterprises if he has sufficient expertise to make...

Venture capital markets are characterized by multiple incentive problems and asymmetric information in an uncertain environment. All kinds of agency problems are present: moral hazard, adverse selection, hold-up problems, window dressing, etc. Entrepreneurs and venture capitalists enter into...

This paper proposes and analyses a model of start-up investment. Innovative entrepreneurs are commercially inexperienced and can benefit from venture capital support. Only part of them succeed in matching with a venture capitalist while the rest must resort to standard bank finance. We consider...

This paper discusses the role of public policy towards the venture capital industry. The model emphasizes four margins: supply of entrepreneurs due to career choice, entry of venture capital funds and search for investment opportunities, entrepreneurial effort and venture capital advice during...

This paper proposes a simple partial equilibrium model to investigate the effects of government policy on venture capital backed investments. Giving up an alternative career, entrepreneurs focus their effort on a single, high risk venture each. Venture capitalists acquire an equity stake and...

The paper studies the effects of tax policy on venture capital activity. Entrepreneurs pursue a single high risk project each but have no own resources. Financiers provide equity finance. They must structure the entrepreneur's profit share and base salary to assure their incentives for full...

This paper analyzes innovation races in a moral hazard setting. I develop a model where two competing entrepreneurs, financed by a single venture capitalist, work independently on the same project. The venture capitalist cannot observe the allocation of funds she provides, which creates a moral...

This paper surveys empirical and theoretical studies of various control mechanisms embedded in venture capital contracts. These mechanisms mitigate incentive problems and opportunistic behavior arising in the uncertain environment of financing young hightechnology enterprises that predominantly...

This paper analyses the impact of public equity schemes on venture capitalist's incentives to finance start-up enterprises and to support the management teams. In a double-sided moral hazard model, it is shown that experienced venture capitalists, who have already financed start-up enterprises,...