Firm Valuation in Venture Capital Financing Rounds: The Role of Investor Bargaining Power

31 Pages Posted: 21 Apr 2012

See all articles by Andy Heughebaert

Andy Heughebaert

Ghent University - Faculty of Economics and Business Administration

Sophie Manigart

Vlerick Business School; Ghent University

Multiple version iconThere are 2 versions of this paper

Date Written: April/May 2012

Abstract

This study explores the impact of the bargaining power of venture capital (VC) firms on the valuation of their portfolio companies. VC firm types with greater bargaining power vis‐à‐vis the entrepreneur are expected to negotiate lower valuations compared with VC firm types with less bargaining power. Consistent with this hypothesis, university and government VC firms, which have comparatively greater bargaining power, negotiate lower valuations compared with independent VC firms. The valuations of captive VC firms equal those of independent VC firms. Our findings suggest that valuations in the VC contract reflect the relative bargaining power of the VC investor.

Keywords: bargaining power, valuation, venture capital

Suggested Citation

Heughebaert, Andy and Manigart, Sophie, Firm Valuation in Venture Capital Financing Rounds: The Role of Investor Bargaining Power (April/May 2012). Journal of Business Finance & Accounting, Vol. 39, Issue 3‐4, pp. 500-530, 2012. Available at SSRN: https://ssrn.com/abstract=2042958 or http://dx.doi.org/10.1111/j.1468-5957.2012.02284.x

Andy Heughebaert (Contact Author)

Ghent University - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Sophie Manigart

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
2
Abstract Views
619
PlumX Metrics