When and Why Do Venture-Capital-Backed Companies Obtain Venture Lending?. (15th June 2017)

• Record Type: Journal Article
• Authors: Tykvová, Tereza
• Is Part Of: Journal of financial and quantitative analysis. Volume 52:Number 3(2017)
• Page Start: 1049
• Page End: 1080
• Publication Date: 2017-06-15
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109017000242
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : I model the decision of an informed early-stage venture capital (VC) investor that considers involving an uninformed VC or venture lending (VL) investor to finance the late stage. Early-stage VC investors that own high-quality value companies tend to signal their quality and they frequently turn to VL investors. Early-stage VC investors prefer VC if the proportion of high-quality companies in the population is high, if their companies have a high upside potential, if they can benefit from the value that late-stage VC investors add, or if uncertainty is high. I find empirical evidence consistent with these predictions.