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Engineering A Venture Capital Market: Lessons From The American Experience, Ronald J. Gilson
This paper seeks to identify the core of the U.S. venture capital contracting model, and then assess the extent to which the model provides guidance in engineering venture capital markets in other countries and, in particular, in identifying a viable role for government in assisting that project. All financial contracts respond to three central contracting problems: uncertainty, information asymmetry and opportunism in the form of agency costs. The special character of venture capital contracting is shaped by the fact that investing in early stage, high technology companies presents these problems in extreme form. The genius of U.S. venture ...