Get 20M+ Full-Text Papers For Less Than $1.50/day. Subscribe now for You or Your Team.

Learn More →

Staged Financing: An Agency Perspective

Staged Financing: An Agency Perspective This paper investigates the structure of outside investment in a profitable entrepreneurial venture. Though efficient, financing the venture up front may be infeasible because the entrepreneur cannot commit to not renegotiate down the outside investor's claim once she's sunk her investment. Staging the investment over time helps to mitigate this commitment problem. The early rounds of investment create collateral that support the later rounds. We characterize the optimal staged investment path and show how it is affected by various features of the venture. The predictions of the model are consistent with observations on staged financing in venture capital. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

Staged Financing: An Agency Perspective

The Review of Economic Studies , Volume 66 (2) – Apr 1, 1999

Loading next page...
 
/lp/oxford-university-press/staged-financing-an-agency-perspective-KFfAyEep5C

References (18)

Publisher
Oxford University Press
Copyright
© Published by Oxford University Press.
Subject
Articles
ISSN
0034-6527
eISSN
1467-937X
DOI
10.1111/1467-937X.00087
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the structure of outside investment in a profitable entrepreneurial venture. Though efficient, financing the venture up front may be infeasible because the entrepreneur cannot commit to not renegotiate down the outside investor's claim once she's sunk her investment. Staging the investment over time helps to mitigate this commitment problem. The early rounds of investment create collateral that support the later rounds. We characterize the optimal staged investment path and show how it is affected by various features of the venture. The predictions of the model are consistent with observations on staged financing in venture capital.

Journal

The Review of Economic StudiesOxford University Press

Published: Apr 1, 1999

There are no references for this article.