Purchase - $38.00

Venture Capital Exit Rights

46 Pages Posted: 10 Jan 2011  

Carsten Bienz

Norwegian School of Economics (NHH)

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Goethe University Frankfurt - Research Center SAFE

Multiple version iconThere are 2 versions of this paper

Date Written: November 22, 2010

Abstract

We investigate when and how venture capital contracts use exit rights such as drag-along and tag-along rights. Utilizing a data set of venture capital contracts from Germany, we find that almost all contracts allocate exit rights to the venture capitalist (VC) rather than to the entrepreneur. In our data set, the vast majority of exit rights deal with the sale of the entire company to a strategic investors rather than with initial public offerings (IPOs). We show that venture capital contracts include exit rights to mitigate potential hold?up problems of the VC in the case of exit.

Suggested Citation

Bienz, Carsten and Walz, Uwe, Venture Capital Exit Rights (November 22, 2010). Journal of Economics & Management Strategy, Vol. 19, Issue 4, pp. 1071-1116, 2010. Available at SSRN: https://ssrn.com/abstract=1733743 or http://dx.doi.org/10.1111/j.1530-9134.2010.00278.x

Carsten Bienz (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen
Norway

Uwe Walz

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Paper statistics

Downloads
1
Abstract Views
407