We study the evolution and renegotiation of the cash flow rights that venture capitalists (VCs) obtain in their portfolio companies. When company performance between financing rounds is poor, subsequent contracts contain stronger VC cash flow rights, and existing VCs tend to either give new VCs...

This paper shows that geographical elements can form an essential component of contract design in addition to more traditional ingredients such as information problems, moral hazard and legal institutions. We analyze cash flow contingencies included in 1,804 contracts between U.S. venture...

I show that VCs frequently have the right to veto specific operational and financial decisions even though they are equity investors with access to other powerful governance mechanisms. Across 182 first-round U.S. venture capital investments, restrictive covenants are commonplace with 92 percent...