Resource title

Screening and advising by a venture capitalist with a time constraint

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Resource description

This paper proposes an intertemporal model of venture capital investment with screening and advising where the venture capitalist s time endowment is the scarce input factor. Screening improves the selection of firms receiving finance, advising allows firms to develop a marketable product, both have a variable intensity. In our setup, optimal linear contracts solves the moral hazard problem. Screening however asks for an entrepreneur wage and does not allow for upfront payments which would cause severe adverse selection. Project characteristics have implications for screening and advising intensity and the distribution of profits. Finally, we develop a formal version of the venture capital cycle by extending the basic setup to a simple model of venture capital supply and demand.

Resource author

Martin D. Dietz

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25406

Resource license

Adapt according to the presented license agreement and reference the original author.