Download This PaperVenture Debt Financing: Determinants of the Lending Decision
25 Pages Posted: 15 Aug 2011 Last revised: 2 Oct 2012
Date Written: October 2, 2012
Abstract
We provide the first empirical evidence on the determinants of the lending decision of venture debt firms, specialized institutions that provide loans to finance growth of high-tech startups. Building on existing field interviews and case studies, we design a choice experiment of the lending decision and conduct experiments with 55 senior venture lenders. We find support for the hypothesis that backing by venture capital firms substitutes for startups’ cash flow. Furthermore, we illustrate the signaling effect of patents and their role as collateral to facilitate the lending decision.
Keywords: high-growth startups, intangible assets, patent signaling, venture debt, new venture financing
JEL Classification: L26, O34, G24
Suggested Citation: Suggested Citation
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