Venture Capital and Private Equity Contracting

Chapter 13. Corporate Venture Capital Fund Contracts

13.1. Introduction and Learning Objectives

Financial contracts between entrepreneurs and venture capital funds have been characterized as one of the most important and distinguishing features of venture capital investment (see Chapters 1, 2, and 10–12; see also Gilson and Schizer, 2003; Megginson, 2004; Sahlman, 1990). Financial contracts are vitally important to the venture capital investment process because contracts minimize information asymmetries and agency problems and appropriately provide incentives for both the entrepreneur and value-added venture capital fund manager to add value to the enterprise. Financial contracts also facilitate the exit of venture capital fund investments in ...