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Title:Screening and advising by a venture capitalist with a time constraint PDF Logo
Authors:Dietz, Martin D.
Issue Date:2003
Series/Report no.:CFS Working Paper 2003/48
Abstract: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.
Subjects:Venture capital
market structure
product development
JEL:D82
G24
L19
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-10528
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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