scholarly journals Venture capital and microfinance: an instrumental approach

2018 ◽  
Vol 3 (2) ◽  
pp. 107
Author(s):  
Romar Correa ◽  
Amelia Correa
Keyword(s):  
Venture Capital ◽  
Consumer Goods ◽  
Full Employment ◽  
Venture Capitalists ◽  
Financial Contracts ◽  
Stationary Equilibrium ◽  
Employment Level ◽  
Instrumental Approach ◽  
Full Utilization ◽  
Two Sectors

<p>Following Adolph Lowe, we divide the economy into two sectors, equipment-goods industries and consumer-goods industries, operating over two periods. A structural relationship between the outputs in the two periods is given by a set of inequalities. One possible outcome is a state of less-than-full utilization of available resources. The economy consists of firms and households. Firms are technology entrepreneurs possessing blueprints for the transformation of the existing inefficient level of output to a full employment level, but no wealth. A subset of households, venture capitalists, is available in each of the three sectors. They finance the technologies in exchange for a share of the profits. We show that a stationary equilibrium exists only in the case when financial contracts are written in the second sector.</p>

scholarly journals Rationale of securities and covenants in venture capital contracts: an application to South Africa

2008 ◽  
Vol 5 (4) ◽  
pp. 15-25
Author(s):  
Nancy Huyghebaert ◽  
Frederik J. Mostert
Keyword(s):  
South Africa ◽  
At Risk ◽  
Risk Factor ◽  
Venture Capital ◽  
Capital Market ◽  
Agency Problems ◽  
Venture Capitalists ◽  
Financial Contracts ◽  
The Usa ◽  
Capital At Risk

Venture capitalists are investing their money in portfolio enterprises and hence are putting their capital at risk. As portfolio enterprises may pursue different objectives than those of their financiers, venture capitalists may perceive agency problems as an important risk factor. Venture capitalists can limit the scope of these risks by specifying the form of financing that they provide to portfolio enterprises and/or by inserting particular covenants in their financial contracts. This paper first briefly reviews the various contractual provisions that can be used to decrease the extent of venture capitalists’ exposure to agency problems. Next, the importance of various securities and covenants is examined in the context of South Africa, where the venture capital market is still relatively young, but growing. Overall, it is concluded that venture capitalists in South Africa limit their exposure to risk, but in a different manner than is typically done in the USA

Collaboration Among Silicon Valley Venture Capitalists

2019 ◽  
pp. 200-219
Author(s):  
Lyda Bigelow ◽  
Jennifer Kuan ◽  
Kyle Mayer
Keyword(s):  
Venture Capital ◽  
Regulatory Focus ◽  
Regional Differences ◽  
Silicon Valley ◽  
Psychological Effects ◽  
Venture Capitalists ◽  
Regulatory Focus Theory ◽  
Industry Clusters ◽  
Entrepreneurial Ventures ◽  
Point Of Entry

Regional differences among industry clusters have long been a puzzle, especially when performance differences are significant. This chapter examines the case of venture capital investing, in which Silicon Valley differs from the rest of the world despite attempts to imitate its model. The point of entry in this chapter is the contract between venture capitalist and entrepreneur. Although such contracts have been analyzed in other research, this chapter argues that the psychological effects of different contract styles are of primary importance to innovative outcomes of entrepreneurial ventures. Thus, it argues that regulatory focus theory, which considers the psychological effects of contracting, is essential to understanding differences in practice and outcomes in venture capital clusters.

scholarly journals Innovative start-ups and young entrepreneurs: Definition of venture capital and findings from Switzerland

2017 ◽  
Vol 7 (1) ◽  
pp. 75-81
Author(s):  
Simon Zaby
Keyword(s):  
Venture Capital ◽  
Success Factors ◽  
Total Sample ◽  
Venture Capitalists ◽  
Flow Of Funds ◽  
Start Up ◽  
Capital Financing ◽  
Proper Definition ◽  
Definition Of ◽  
Start Ups

This paper aims to investigate success factors of innovative start-up firms from the perspective of young start-up managers. Which key factors did they experience before and since the foundation of their company? The experience from the quite young Swiss start-up scene pro-vides important insights to entrepreneurs and policy-makers in emerging countries that cur-rently face the necessity of building up a start-up environment. One part of the data has been collected by the author, the other part originates from the Swiss Venture Capital Database (total sample size: 306). The results show a significant role of venture capital financing for the success of innovative start-ups. Interestingly, this is to some extent because the start-ups see various additional benefits from venture capitalists involved in their firm. Thus, the findings shed new light on a proper definition of venture capital that should not solely focus on the flow of funds.

scholarly journals Exit Decision of Venture Capital Based on Linear Contract in Continuous Time: IPO or M&A

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-19
Author(s):  
Ding Chuan ◽  
Dahai Li ◽  
Meishu Ye
Keyword(s):  
Social Welfare ◽  
Venture Capital ◽  
Interest Rates ◽  
Initial Public Offering ◽  
Continuous Time ◽  
Production Efficiency ◽  
Venture Capitalists ◽  
Social Welfare Maximization ◽  
Incentive Problem ◽  
Public Offering

Based on the assumption that the long-term value of a venture capital satisfies the algebraic Brownian motion, we develop a continuous-time exit model of venture capital under different exit modes, namely, initial public offering (IPO) and mergers and acquisitions (M&A). The employee incentive problem is analyzed jointly with the exit decision of the firm in terms of the exit timing and the exit mode. Further, the problem of capital exit is considered from two perspectives, namely, optimal venture capital and social welfare maximization, and the differences between these exit decisions are compared. Our model predicts that the timing of an IPO, the purpose of which is to maximize the utility of the capitalists, lags behind the exit timing, whose purpose is to maximize social welfare. Using a numerical analysis, this paper also proves that increasing the production efficiency, lowering the interest rates, and improving risk management can make the exit decision of venture capitalists converge with that of maximizing social welfare.

Venture Capital Communities

2019 ◽  
Vol 55 (2) ◽  
pp. 621-651 ◽  
Author(s):  
Amit Bubna ◽  
Sanjiv R. Das ◽  
Nagpurnanand Prabhala
Keyword(s):  
Machine Learning ◽  
Venture Capital ◽  
Computational Methods ◽  
Small Groups ◽  
Early Stage ◽  
Spatial Location ◽  
Venture Capitalists ◽  
Learning Tools ◽  
Physical Sciences

Although venture capitalists (VCs) can choose from thousands of potential syndicate partners, many co-syndicate with small groups of preferred partners. We term these groups “VC communities.” We apply computational methods from the physical sciences to 3 decades of syndication data to identify these communities. We find that communities comprise VCs that are similar in age, connectedness, and functional style but undifferentiated in spatial location. Machine-learning tools classify communities into 3 groups roughly ordered by their age and reach. Community VC financing is associated with faster maturation and greater innovation, especially for early-stage firms without an innovation history.

scholarly journals Influence of Venture Capital and Knowledge Transfer on Innovation Performance in the Big Data Environment

2019 ◽  
Vol 12 (4) ◽  
pp. 188 ◽  
Author(s):  
Chuanrong Wu ◽  
Xiaoming Yang ◽  
Veronika Lee ◽  
Mark E. McMurtrey
Keyword(s):  
Big Data ◽  
Knowledge Transfer ◽  
Venture Capital ◽  
New Product ◽  
User Preferences ◽  
Innovation Performance ◽  
Venture Capitalists ◽  
New Knowledge ◽  
Data Environment ◽  
Start Ups

Technological innovation requires large investments. Venture capital (VC) is a prominent financial source for innovative start-ups. A venture capitalist will inevitably transfer knowledge to facilitate the innovation of a firm while monitoring and advising its portfolio companies. Only when a firm has its own valuable new knowledge and high growth potential would venture capitalists select it. At the same time, big data knowledge, such as customer demands and user preferences, is also important for the new product development of a firm in the big data environment. Therefore, private knowledge transferred from venture capitalists, new knowledge developed independently by a firm itself, and big data knowledge are the three main types of knowledge for venture-backed firms in the big data environment. To find the influences of VC and knowledge transfer on the innovative performance of venture-backed firms, a model of maximizing the present value of the expected profit of new product innovation performance of a venture-backed firm in the big data environment is presented. The model can help venture capitalists to determine the scale of investment and the optimal exit time and predict the internal rate of return (IRR). This model can also help innovative start-ups to illustrate the value and prospects of a project to attract investment in their business prospectus.

scholarly journals Private equity and venture capital in South Africa: A comparison of project financing decisions

2013 ◽  
Vol 16 (3) ◽  
pp. 258-278 ◽  
Author(s):  
David Portmann ◽  
Chipo Mlambo
Keyword(s):  
South Africa ◽  
Venture Capital ◽  
Private Equity ◽  
Venture Capitalists ◽  
Project Financing ◽  
Financing Decisions ◽  
Start Up ◽  
Risk Appetite ◽  
Investment Opportunities ◽  
Venture Capital Firms

This paper investigates the manner in which private equity and venture capital firms in South Africa assess investment opportunities. The analysis was facilitated using a survey containing both Likert-scale and open-ended questions. The key findings show that both private equity and venture capital firms rate the entrepreneur or management team higher than any other criterion or consideration. Private equity firms, however, emphasise financial criteria more than venture capitalists do. There is also an observable shift in the investment activities away from start-up funding, towards later-stage deals. Risk appetite has also declined post the financial crisis.

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