Screening and advising by a venture capitalist with a time constraint

Arbeitspapier

This paper proposes an intertemporal model of venture capital investment with screening and advising where the venture capitalist's time endowment is the scarce input factor. Screening improves the selection of firms receiving finance, advising allows firms to develop a marketable product, both have a variable intensity. In our setup, optimal linear contracts solves the moral hazard problem. Screening however asks for an entrepreneur wage and does not allow for upfront payments which would cause severe adverse selection. Project characteristics have implications for screening and advising intensity and the distribution of profits. Finally, we develop a formal version of the 'venture capital cycle' by extending the basic setup to a simple model of venture capital supply and demand.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 2003/48

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Market Structure, Firm Strategy, and Market Performance: Other
• Subject: Venture capital ; market structure ; product development ; Risikokapital ; Unternehmensgründung ; Lieferanten-Kunden-Beziehung ; Agency Theory ; Betriebliche Terminplanung ; Unternehmensberatung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dietz, Martin D.
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/25406
• URN: urn:nbn:de:hebis:30-10528
• Last update: 10.03.2025, 11:44 AM CET