The Dynamics of Venture Capital Contracts

38 Pages Posted: 5 Mar 2008 Last revised: 12 Nov 2019

See all articles by Carsten Bienz

Carsten Bienz

Norwegian School of Economics (NHH)

Julia Hirsch

Universidad Autónoma de Querétaro

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Date Written: December 15, 2010


Using a detailed German data set on venture capital contracts, we document that contracts between venture capitalists and their portfolio firms specify more complete conditions for future financing for firms that do have no suitable outside financing option, and therefore lower ex-post bargaining power. Our result is consistent with theories of hold-up, where complete contracts protect the entrepreneur from expropriation by the financier. Moreover, there is evidence of learning by venture capitalists. Other possible explanations for observed contracts, such as multitasking or coordination costs, instead have little explanation power.

Keywords: Venture capital, hold-up, renegotiation, staging, milestones

JEL Classification: G24, G32, G34

Suggested Citation

Bienz, Carsten and Hirsch, Julia, The Dynamics of Venture Capital Contracts (December 15, 2010). Available at SSRN: or

Carsten Bienz (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30

Julia Hirsch

Universidad Autónoma de Querétaro ( email )

Cerro de las Campanas S/N, Las Campanas
Queretaro, 76010

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