Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Week 14 DQs - Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies, which usually can't raise funds

image text in transcribed
Week 14 DQs - Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies, which usually can't raise funds through other means. In exchange for this financing, the VCsreceivea share of the company's equity, and the founders of the firm typically stay on and continue to manage the company. a. Describe the nature of the incentive conflict between VCs and the managers, identifying the principal and the agent. b. VC investments have two typical components: (1) Managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company's board. Discuss how these two components help address the incentive conflict

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Applied Wildlife Habitat Management

Authors: Roel R. Lopez, Michael L. Morrison, Israel D. Parker

1st Edition

9781623495022

More Books

Students also viewed these General Management questions