Consequently, this is the unique way to extract the social significance of an innovation (Gans and Stern, 2003). Hence, triggering innovations,along with the firm’s professionalization, is another valuable feature of the venture capital funding.
All in all, contribution of the venture capital to the start-up firm is considerable. Besides many features provided by the venture capitalist discussed above, venture capital has one more important attribute: providing credibility, it attracts new funding. Baeyens and Manigart (2003) explain this by the fact that, through screening, observing and value-adding, venture capitalists reduce the information asymmetries and financial risks, and therefore adjoin legitimacy to the venture backed company and consequently influence on further financing. The last is an admirable fundament for further expansion of the firm. This, in turn, spurs the growth and development of entrepreneurship in the national economy in general – the initial notion at the very beginning of this paper.
Up to now, one may conclude that venture capital funding is brilliant way of raising new business and realizing one’s “imagination”. Indeed, the role of venture capital in financing small early-stage business is noteworthy, but this way of funding new business has its “dark side” too. This is examined further.
学生缴费管理系统的需求分析4 The “dark side” of the venture capital funding
Once the venture capitalist and the entrepreneur have ended up the initial negotiations, and the former introduced its capital in, joint efforts should lead toward improved performance and higher expected returns. Both sides develop and contribute different types of knowledge and skills, “allowing each party to exploit its comparative advantage” (Cable and Shane, 1997, p.143). Moreover, confidence is crucial in entrepreneur - venture capitalist relationship and corresponds with a certain level of certainty and trust, which in turn promotes mutually compatible interests, but not acting opportunistically (Shepherd and Zacharakis, 2001). Not surprisingly, at one moment, a prisoner’s dilemma arises: each side tends to behave selfish, although knowing that joint success yields to synergy (Cable and Shane, 1997). Consequently, a conflict of interests comes up. At that point of time or even earlier, the investor strengthens the monitoring process of the firm. Now, he does provide not only value-add services, but he actively involves in running the firm in order to limit or eliminate eventual opportunistic behaviour from the entrepreneur (Lerner, 1995) and to force him to perform effectively.
As a result, agency problems often occur. “Conflicts arise in such situations because the entrepreneur may have information unknown to the venture capitalist and may choose to shirk or overinvest, creating agency costs” (Barry, 1994, p.6). But, Admati and Pfleiderer(1994) describe venture capitalist as well-informed, so it is high probable that agency problems will be avoided in such risky investments.
Whether it is, hedging itself is the most common strategy for the venture capitalist. Stage financing is the most suitable monitoring and control device, acting as a buffer versus entrepreneur’s opportunistic behaviour, because each time new capital is introduced in the firm, contracts’ renegotiation arises as a necessity (Giudici and Paleari, 2000). Renegotiation leads toward reporting what has been done until now, and what is the basis for the further running of the firm. Instalment financing takes place after every renegotiation, only if certain milestone (i.e. enhanced profitability, approached
上一页 [1] [2] [3] [4] [5] [6] [7] [8] [9] 下一页
风险投资融资英文文献和翻译 第5页下载如图片无法显示或论文不完整，请联系qq752018766
