Venture Capital Contracting in the Information Age
D. Gordon Smith
Brigham Young University - J. Reuben Clark Law School
Journal of Small & Emerging Business Law, Vol. 2, p. 133, 1998
Most venture capitalists provide services to their portfolio companies beyond capital investment. Although these services form an important part of the bargain between the venture capitalists and the entrepreneur, they are rarely specified or even capable of specification in venture capital contracts. This article examines the moral hazard and adverse selection problems facing entrepreneurs who "hire" venture capitalists to provide value-added services and describes the role of the market for venture capitalist reputation in addressing those problems. Further, the Article speculates about whether advances in information technology - specifically, the World Wide Web - are likely to improve the efficiency of the market for venture capitalist reputation.
Number of Pages in PDF File: 44Accepted Paper Series
Date posted: August 4, 1998
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