Abstract
This chapter analyzes the venture capitalist’s incentives to maximize the profits of the entrepreneurs of ventures and the limited partners of a venture fund. Venture capital is a professionally managed pool of capital invested in equity-linked private ventures. Venture capitalists are actively involved in the management of the venture to assure its success. Venture capitalists are general partners and outside investors are limited partners. Venture capital contracts have three main characteristics: 1) staging the commitment of capital and preserving the option to abandon, 2) using compensation systems directly linked to value creation 3) preserving ways to force management to distribute investment proceeds.
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Gifford, S. (1998). The Role of the Venture Capitalist. In: The Allocation of Limited Entrepreneurial Attention. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5605-3_8
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DOI: https://doi.org/10.1007/978-1-4615-5605-3_8
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