Venture Capital and Private Equity Contracting

An International Perspective

By

  • Douglas Cumming, Schulich School of Business, York University, Canada
  • Sofia Johan, AFM Senior Research Fellow at the Tilburg Law and Economics Centre (TILEC) in The Netherlands and Adjunct Professor of Law and Finance at the Schulich School of Business, York University, Canada

Other books present corporate finance approaches to the VC/PE industry, but many key decisions require an understanding of the ways that law and economics work together. This book is better than straight corporate finance textbooks because it offers broad perspectives and principles that enable readers to deduce the economic implications of specific contract terms. This approach avoids the common pitfalls of implying that contractual terms apply equally to firms in any industry anywhere in the world.
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Audience

Upper-division undergraduates and graduate students studying financial and legal aspects of venture capital and private equity

 

Book information

  • Published: January 2009
  • Imprint: ACADEMIC PRESS
  • ISBN: 978-0-12-198581-3

Reviews

"The book covers many facets of venture capital and private equity contracting, from the birth of a venture capital fund to its exit, giving readers a complete and comprehensive picture about the venture capital and private equity industry."--Xuan Tian, Indiana University



Table of Contents

PrefacePart I. Introduction1. Introduction and Overview2. Agency Costs and Forms of Finance Part II. Fund Structure and Governance3. What Should Fund Managers Care About? Perspectives from Institutional Investors4. Limited Partnership Agreements5. Compensation Contracts 6. Fundraising and Regulation7. Specialized Investment Mandates8. The Role of Government and Alternative Policy OptionsPart III. Financial Contracting between Funds and Entrepreneurs9. The Investment Process10. Security Design11. Security Design and Adverse Selection12. Corporate Venture Capital Fund Contracts13. Preplanned Exits and Contract DesignPart IV. Investor Effort14. Investor value-added15. Do contracts affect effort?16. Where to invest?17. How many investee firms?Part V. Divestment18. The Divestment Process19. Exit Outcomes20. Contracts and Exits21. Returns, Valuation and DisclosurePart VI. Conclusion and Appendices22. Summary and Concluding RemarksAppendix 1: Sample Limited Partnership Fund AgreementAppendix 2: Sample Term SheetAppendix 3: Sample Shareholder AgreementAppendix 4: Sample Subscription AgreementIndex