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Full-Text Articles in Law
Don't Go Chasing Waterfalls: Fiduciary Duties In Venture Capital Backed Startups, Sarath Sanga, Eric L. Talley
Don't Go Chasing Waterfalls: Fiduciary Duties In Venture Capital Backed Startups, Sarath Sanga, Eric L. Talley
Faculty Scholarship
Venture-capital-backed startups are often crucibles of conflict between common and preferred shareholders, particularly around exit decisions. Such conflicts are so common, in fact, that they have catalyzed an emergent judicial precedent – the Trados doctrine – that requires boards to prioritize common shareholders' interest and to treat preferred shareholders as contractual claimants. We evaluate the Trados doctrine using a model of startup governance that interacts capital structure, corporate governance, and liability rules. The nature and degree of inter-shareholder conflict turns not only on the relative rights and options of equity participants, but also on a firm's intrinsic value as well …
Private Ownership At A Public Crossroads: Studying The Rapidly Evolving World Of Corporate Ownership, Ira M. Millstein Center For Global Markets And Corporate Ownership
Private Ownership At A Public Crossroads: Studying The Rapidly Evolving World Of Corporate Ownership, Ira M. Millstein Center For Global Markets And Corporate Ownership
Ira M. Millstein Center for Global Markets and Corporate Ownership
Capital formation in the United States is currently in the midst of a significant transition with largely unexplored consequences for the ownership and control of American business, as well as significant implications for the future of the public equity markets. Although public equity markets remain vast and important, they are no longer the primary source of capital for business formation and growth. Increasingly, capital for business formation and growth is being raised — and held — privately from a relatively new set of institutional investors (most importantly, venture capital and private equity funds). As a result, ownership and control over …
Protecting Reliance, Victor P. Goldberg
Protecting Reliance, Victor P. Goldberg
Faculty Scholarship
Reliance plays a central role in contract law and scholarship. One party relies on the other's promised performance, its statements, or its anticipated entry into a formal agreement. Saying that reliance is important, however, says nothing about what we should do about it. The focus of this Essay is on the many ways that parties choose to protect reliance. The relationship between what parties do and what contract doctrine cares about is tenuous at best. Contract performance takes place over time, and the nature of the parties 'future obligations can be deferred to take into account changing circumstances. Reliance matters …
Locating Innovation: The Endogeneity Of Technology, Organizational Structure, And Financial Contracting, Ronald J. Gilson
Locating Innovation: The Endogeneity Of Technology, Organizational Structure, And Financial Contracting, Ronald J. Gilson
Faculty Scholarship
There is much we do not understand about the "location" of innovation: the confluence, for a particular innovation, of the technology associated with the innovation; the innovating firm's size and organizational structure; and the financial contracting that supports the innovation. This Essay suggests that these three indicia are determined simultaneously and discusses the interaction among them through four examples of innovative activity whose location is characterized by tradeoffs between pursuing the activity in an established company, in a smaller, earlier-stage company, or some combination of the two. It first considers the dilemma faced by an established company in deciding whether …
Patents, Venture Capital, And Software Start-Ups, Ronald J. Mann, Thomas W. Sager
Patents, Venture Capital, And Software Start-Ups, Ronald J. Mann, Thomas W. Sager
Faculty Scholarship
This paper analyzes the relation between the patenting behavior of startup firms and the progress of those firms through the venture capital cycle. Linking data relating to venture capital financing of software startup firms with data concerning the patents obtained by those firms, we find significant and robust positive correlations between patenting and several variables measuring the firm's performance (including number of rounds, total investment, exit status, receipt of late stage financing, and longevity). The data also show that (1) only about one in four venture-backed software firms acquired even one patent during the period of the study; (2) patenting …
Engineering A Venture Capital Market: Lessons From The American Experience, Ronald J. Gilson
Engineering A Venture Capital Market: Lessons From The American Experience, Ronald J. Gilson
Faculty Scholarship
The venture capital market and firms whose creation and early stages were financed by venture capital are among the crown jewels of the American economy. Beyond representing an important engine of macroeconomic growth and job creation, these firms have been a major force in commercializing cutting-edge science, whether through their impact on existing industries as with the radical changes in pharmaceuticals catalyzed by venture-backed firms' commercialization of biotechnology, or by their role in developing entirely new industries as with the emergence of the Internet and World Wide Web. The venture capital market thus provides a unique link between finance and …