Contracts Commons^™

Venture Capital Contract Design: An Empirical Analysis Of The Connection Between Bargaining Power And Venture Financing Contract Terms, Spencer Williams

Fordham Journal of Corporate & Financial Law

This Article presents an empirical analysis of the connection between bargaining power and contract design using an original dataset of over 5,500 equity and debt venture financings from 2004–2015. Using the total supply of venture capital in the U.S. as a measure of relative bargaining power between entrepreneurs and investors, this Article finds that venture capital supply has a statistically significant relationship with price and non-price terms in both equity and debt financings. These results contradict one of three theoretical accounts of bargaining power and support the other two.

Amending Corporate Charters And Bylaws, Albert H. Choi, Geeyoung Min

All Faculty Scholarship

Recently, courts have embraced the contractarian theory that corporate charters and bylaws constitute a “contract” between the shareholders and the corporation and have been more willing to uphold bylaws unilaterally adopted by the directors. This paper examines the contractarian theory by drawing a parallel between amending charters and bylaws, on the one hand, and amending contracts, on the other. In particular, the paper compares the right to unilaterally amend corporate bylaws with the right to unilaterally modify contract terms, and highlights how contract law imposes various limitations on the modifying party’s discretion. More generally, when the relationship of contracting parties …

In Pursuit Of Good & Gold: Data Observations Of Employee Ownership & Impact Investment, Christopher Geczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker

Anne Tucker

A startup's path to self-sustaining profitability is risky and hard, and most do not make it. Venture capital (VC) investors try to improve these odds with contractual terms that focus and sharpen employees' incentives to pursue gold. If the employees and investors expect the startup to balance the goal of profitability with another goal - the goal of good - the risks are likely to both grow and multiply. They grow to the extent that profits are threatened, and they multiply to the extent that balancing competing goals adds a dimension to the incentive problem. In this Article, we explore …

Market Information And The Elite Law Firm, Elisabeth De Fontenay

Faculty Scholarship

As a subcategory of contract negotiations, corporate transactions present information problems that have not been fully analyzed. In particular, the literature does not address the possibility that parties may simply be unaware of value-increasing transaction terms or their outside option. Such unawareness can arise even for transactions that attract many competing parties, if the bargaining process is such that (1) the price terms are negotiated and fixed prior to the non-price terms, contrary to the standard assumption; and (2) some of the non-price terms remain private for some period of time.

A simple bargaining model shows that, when such unawareness …

In Pursuit Of Good & Gold: Data Observations Of Employee Ownership & Impact Investment, Christopher Geczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker

Faculty Publications By Year

A startup's path to self-sustaining profitability is risky and hard, and most do not make it. Venture capital (VC) investors try to improve these odds with contractual terms that focus and sharpen employees' incentives to pursue gold. If the employees and investors expect the startup to balance the goal of profitability with another goal - the goal of good - the risks are likely to both grow and multiply. They grow to the extent that profits are threatened, and they multiply to the extent that balancing competing goals adds a dimension to the incentive problem. In this Article, we explore …