Essays on entrepreneurial finance: Venture capital, financial contracting, and the structure of investment.

摘要

This dissertation is concerned with entrepreneurial finance. Models are presented to analyze the structure of outside investment in an entrepreneurial project, and to analyze the form of the financial contract between the outside investor and the entrepreneur. The predictions of the models investigated are consistent with the investment structure and contracts used in venture capital.;Fundamental to the analysis is a perspective on the importance of the entrepreneur himself. The entrepreneur has unique human capital that adds value to his project. This creates a commitment problem for the entrepreneur when he must raise outside capital to finance his venture. He cannot commit himself to not repudiate the relationship with the investor in the future by removing his valuable human capital from the project. Chapter 1 investigates this commitment problem in the context of a model reminiscent of venture capital. Investment in the venture is staged over time and the venture provides a single return. In this setting the threat of ex post repudiation bounds the amount of the venture's return the entrepreneur can credibly promise the investor ex ante. The result is that many profitable projects go unfinanced.;Chapters 2 and 3 show how the institutional details of venture capital finance attempt to overcome this commitment problem. Chapter 2 investigates the choice to stage the venture's investment. Staging is shown to be a response to the venture's evolution. The commitment problem becomes weaker over time as the entrepreneur's human capital becomes embodied in the project itself and hence becomes contractible. The venture is therefore able to take on more outside investment as it evolves. The conclusions of this chapter closely match observations on the staging of investment in venture capital.;Chapter 3 introduces uncertainty into the analysis and examines the contracting issues governing the relationship between the entrepreneur and the venture capitalist. The key issue is control over making each of the staged investment decisions. The entrepreneur would like to get the venture financed by giving up as little control as possible. The optimal financial contract has the characteristics of convertible preferred stock, the most commonly used financing instrument in venture capital.