Venture Capital and Private Equity Contracting

Chapter 7. Fundraising and Regulation

7.1. Introduction and Learning Objectives

The purpose of this chapter is to improve our empirical understanding of the factors that motivate institutional investors to allocate capital to private equity. Chapters 5 and 6 analyzed limited partnership agreements in detail with data from 17 countries around the world. This chapter shows that because contracts are incomplete (i.e., it is not possible to write contracts that cover all contingencies, particularly for a 10- to 13-year fund), contractual agreements are by themselves not sufficient to address all of the concerns that institutional investors have when investing in venture capital and private equity funds. As such, regulation plays a strong role in ...