Jens Burchardt is Project Leader, Boston Consulting Group, Berlin, Germany.
Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research
Article first published online: 3 APR 2014
© 2014 Baylor University
Entrepreneurship Theory and Practice
How to Cite
Burchardt, J., Hommel, U., Kamuriwo, D. S. and Billitteri, C. (2014), Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research. Entrepreneurship Theory and Practice. doi: 10.1111/etap.12104
The authors thank the editor, Douglas Cumming, and two anonymous reviewers for their helpful comments and guidance. All remaining errors are solely the authors’ responsibility.
- Article first published online: 3 APR 2014
This article provides a comprehensive theoretical and empirical literature review of venture capital contracts. This outlines the differences between theoretical and practical uses of contract designs; that is, (1) how does the choice of securities give rise to different adverse selection problems in terms of attracting different types of entrepreneurial companies; how does the choice of securities in conjunction with cash flow and control rights provisions affect (2) the effort levels by the entrepreneur and the investor; and (3) ultimately affect entrepreneurial outcomes. This article highlights the major discrepancies between theory and practice and points out potential avenues for further research.