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Casamatta, Catherine
and Haritchabalet, Carole
(2014)
Dealing with Venture Capitalists: Shopping Around or Exclusive Negotiation.
Review of Finance, 18 (5).
pp. 1743-1773.
This is the latest version of this item.
Abstract
We study the fund-raising strategy of an entrepreneur when investors have private information about his project’s profitability. The entrepreneur cares about monetary profits and about the probability to obtain financing. If he contacts both venture capitalists (VCs) simultaneously, he obtains high monetary profits. If he commits to a period of exclusive negotiation with one VC, he increases the probability to obtain financing but deal terms deteriorate. The optimal negotiation strategy results from this tradeoff. We also solve for the equilibrium financial contracts and obtain implications for VCs’ portfolios and entrepreneurs’ deals.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | 2014 |
| Refereed: | Yes |
| JEL Classification: | D82 - Asymmetric and Private Information G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSM Research (Toulouse), TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 16 Mar 2015 14:52 |
| Last Modified: | 02 Apr 2021 15:49 |
| OAI Identifier: | oai:tse-fr.eu:28782 |
| URI: | https://publications.ut-capitole.fr/id/eprint/16628 |
Available Versions of this Item
-
Dealing with Venture Capitalists: Shopping Around or Exclusive Negotiation. (deposited 18 Jan 2012 05:58)
- Dealing with Venture Capitalists: Shopping Around or Exclusive Negotiation. (deposited 16 Mar 2015 14:52) [Currently Displayed]
