In his book, 'Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed - and What to Do about It,' Harvard Business School Professor, Josh Lerner, explains that governments can only play a limited role in spurring innovation and entrepreneurship....

This paper uses real options analysis to study later round financing in the presence of two standard venture capital contracting provisions: anti-dilution (ratchet) and liquidation preference. We argue that such provisions can preclude financing of a positive NPV venture in the case of a large...

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...

This paper investigates how patent applications and grants held by new ventures improve their abilityto attract venture capital (VC) financing. We argue that investors are faced with considerable uncertaintyand therefore rely on patents as signals when trying to assess the prospects of potential...

As most other countries, Germany also faces dramatic regional differences in terms of socioeconomic development. One important driver of such development is the existence of a healthy entrepreneurial activity and the creation of new companies. We argue that venture capital (VC) and especially...

Over the past ten years, private equity and venture capital have played an increasingly important role in the European economy. In parallel to the increase in investments, contribution of the private equity and venture capital industry to employment in Europe has grown.Against this background,...

Why do private firms stay private? Empirical evidence on this issue is sparse, as most private firms in the US do not report their financial results. We investigate why private status matters by taking advantage of a unique dataset of large, leveraged private firms with SEC filings. Unlike a...

Using a hand-collected sample of contracts and investment proposals from German venturecapital financing relationships, we analyze specific incentive conflicts. We apply indirect anddirect measures of these problems and extend the “direct” approach by Kaplan and Strömberg(2004) to a four-...

Using a hand-collected sample of contracts and investment proposals from German venturecapital (VC) financing relationships, we find that experienced and or private law/independentVC firms rely to a lesser degree on debt financing and more on certain covenants in VC con-tracting even when we...

Existing literature suggests that entrepreneurs with prior firm-founding experience have moreskills and social connections than novice entrepreneurs. Such skills and social connectionscould give experienced founders some advantage in the process of raising venture capital.This paper uses a large...