Changing the Nexus: The Evolution and Renegotiation of Venture Capital Contracts
(2015) In Journal of Financial and Quantitative Analysis 50(3). p.349-375- Abstract
- 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 senior claims or forfeit their existing rights altogether. These results are consistent with the importance of financing problems between different VCs and with theory predicting that financing frictions worsen with poor performance. A consequence is that VC cash-flow rights are frequently significantly diluted before exit, implying that VC investments are riskier than previously estimated.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/7972375
- author
- Bengtsson, Ola LU and Sensoy, Berk A.
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Journal of Financial and Quantitative Analysis
- volume
- 50
- issue
- 3
- pages
- 349 - 375
- publisher
- Cambridge University Press
- external identifiers
-
- wos:000359788000004
- scopus:84939261106
- ISSN
- 0022-1090
- DOI
- 10.1017/S0022109015000137
- language
- English
- LU publication?
- yes
- id
- 906f68b7-6ffb-4a07-b8ce-1c0f5bba8d0b (old id 7972375)
- date added to LUP
- 2016-04-01 13:02:02
- date last changed
- 2022-03-29 05:06:31
@article{906f68b7-6ffb-4a07-b8ce-1c0f5bba8d0b, abstract = {{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 senior claims or forfeit their existing rights altogether. These results are consistent with the importance of financing problems between different VCs and with theory predicting that financing frictions worsen with poor performance. A consequence is that VC cash-flow rights are frequently significantly diluted before exit, implying that VC investments are riskier than previously estimated.}}, author = {{Bengtsson, Ola and Sensoy, Berk A.}}, issn = {{0022-1090}}, language = {{eng}}, number = {{3}}, pages = {{349--375}}, publisher = {{Cambridge University Press}}, series = {{Journal of Financial and Quantitative Analysis}}, title = {{Changing the Nexus: The Evolution and Renegotiation of Venture Capital Contracts}}, url = {{http://dx.doi.org/10.1017/S0022109015000137}}, doi = {{10.1017/S0022109015000137}}, volume = {{50}}, year = {{2015}}, }