Venture Capital Dynamics: Challenges in Financing Technological Entrepreneurship
Author(s)Kaeding, Evan L
KeywordsVenture capital -- Risk management
New business enterprises -- Economic aspects
High technology industries -- Funding
Businesspeople -- Decision making
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AbstractThe venture capital process is fraught with risk to the venture capitalist induced by agency costs, information asymmetry and moral hazard. Venture capitalists employ sophisticated contracting techniques to mitigate these risks, often at the expense of the entrepreneur. Additional complexity can arise depending on the affiliation of the venture capitalist. This work highlights the common pitfalls that high-technology entrepreneurs face as a result of the circumstances inherent in the fund raising process, and makes recommendations for mitigating these pitfalls.