Title: Staged Financing in Venture Capital: A Human Capital Perspective
Abstract: The paper analyzes the “bilateral commitment” dilemma between venture capitalist and entrepreneur, which arises from the transformation of specific human capital to exclusive human capital of entrepreneur, and explains the mechanism for staged financing to solve this dilemma. Furthermore, it argues that staged financing、time option and noncompete clauses are all essentially the means for both contract parities to win the confidence of the other party by tying their own hands and feet. Finally, it concludes that (1) the stronger the specificity of nonhuman capital, the fewer each staged financing; (2) the stronger the specificity of human capital, the more each staged financing; (3) the amount of each staged financing is increasing; (4) staged financing is usually accompanied by time option and noncompete clauses for the purpose of starting venture capitalist’s investment before entrepreneur’s human capital investment.
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
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