Law, Finance, and Venture Capital: The Cost of Capital for High-Tech Firms
44 Pages Posted: 17 Jul 2012
Date Written: July 16, 2012
We use data from a professionally-conducted survey of high-technology managers to examine international variation in private equity contracting and cost of capital. Employing new variables and analyzing hundreds of financing rounds in the U.S., Europe, and Israel, we find that investor sophistication is associated with the ownership ratio (amount raised/valuation), but that funding rounds in common law countries do not receive lower ownership ratios vis-à-vis those in civil law countries. We also find that the institutional environment matters for exit strategy and valuation.
Keywords: Venture capital, international finance, valuation, legal origin
JEL Classification: G24, G32
Suggested Citation: Suggested Citation