Venture capital contracting

• Main Authors: Hsu-Tung-Kuang, 徐同廣
• Other Authors: 江炯聰
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/63965596930602929156

碩士 === 國立臺灣大學 === 商學研究所 === 91 === Abstract The contract between venture capitalists and entrepreneur is not only the distribution basis of revenue and of risk, but also of right and duty (responsibility; obligation). Therefore, without the well-designed contract, venture capitalists could be under a higher risk or a less revenue situation. In addition, the special characteristics of this industry, such as technology and market situations, make the contracting process more difficult and more important. This research first generalizes the terms and special ways that are used in this industry, and then discusses the necessary items and principals that should be noticed during the contracting process. Due to the information asymmetry of entrepreneur’s ability and actions, the high uncertainty of market and technology in this industry and the necessary for allocation revenues, contracts between venture capitalists and entrepreneur must contain resolution to agency problem, risk allocation and revenue allocation. Among the contract structure, the relationship of agency problem and terms is to control terms used to overcome the adverse selection problem and some terms used to lower the probability of moral hazard problem. The terms for risk allocation should be designed firstly to classify different types of risk and then select right terms for specific risk. Revenue allocation terms discuss the type of security should be taken and related terms. Dropout terms relate to different withdrew situations. The future investment terms correspond to the special stage investment characters. The principals of selecting right terms depend on the result and difficulty of new venture due diligence. And the bargaining power is the basis to judge the terms can be signed on or not. In one word, this research has concluded that in the process of designing contracts, venture capitalists should follow the principals and the corresponding terms. Key words: venture capital, contract, agency cost, and term