When and Why Do Venture Capital-Backed Companies Obtain Venture Lending?

Posted: 15 Nov 2017

See all articles by Tereza Tykvova

Tereza Tykvova

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Date Written: November 13, 2017

Abstract

I model the decision of an informed early-stage venture capital (VC) investor that considers involving an uninformed VC or venture lending (VL) investor to finance the late stage. Early-stage VC investors that own high-quality value companies tend to signal their quality and they frequently turn to VL investors. Early-stage VC investors prefer VC if the proportion of high-quality companies in the population is high, if their companies have a high upside potential, if they can benefit from the value that late-stage VC investors add, or if uncertainty is high. I find empirical evidence consistent with these predictions.

Keywords: venture lending, venture capital, entrepreneurial companies, asymmetric information, stage financing

JEL Classification: G24, G32

Suggested Citation

Tykvova, Tereza, When and Why Do Venture Capital-Backed Companies Obtain Venture Lending? (November 13, 2017). Journal of Financial and Quantitative Analysis (JFQA), Vol. 52, No. 3, 2017, Available at SSRN: https://ssrn.com/abstract=3070128

Tereza Tykvova (Contact Author)

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Germany

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