Corporate Venture Capital Contracts
24 Pages Posted: 23 Nov 2006 Last revised: 10 Sep 2008
Abstract
This paper introduces a dataset of securities used by US and Canadian venture capitalists (VCs) in seed, early and expansion stage Canadian entrepreneurial firms spanning the period 1991-2004. The data indicate Canadian limited partnership VCs are more likely to use common equity and convertible securities than Canadian corporate VCs, while Canadian corporate VCs are more likely to use non-convertible debt than Canadian limited partnership VCs. Similar patterns in security design are observed in the data in this paper for cross-border US limited partnership and corporate VC investments in Canadian entrepreneurial firms. Related evidence also indicates very similar contracting practices for European corporate VC investments. The securities used offer one explanation as to why corporate VC performance is typically less successful than limited partnership VC performance. The data also challenge the conventional wisdom that VCs always use convertible preferred equity.
Keywords: Corporate Venture Capital, Financial Contracting
JEL Classification: G24, G31, G32, G28, G33, G34, G35, G38
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Steven N. Kaplan and Per Strömberg
-
By Steven N. Kaplan and Per Strömberg
-
Venture Capital and the Structure of Capital Markets: Banks Versus Stock Markets
By Ronald J. Gilson and Bernard S. Black
-
Money Chasing Deals?: The Impact of Fund Inflows on Private Equity Valuations
By Paul A. Gompers and Josh Lerner
-
Private Equity Performance: Returns, Persistence and Capital Flows
-
Private Equity Performance: Returns, Persistence and Capital
-
The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?
-
Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence
By Thomas F. Hellmann and Manju Puri