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Venture Capital and Private Equity Contracting. An International Perspective. Edition No. 2

  • Book

  • October 2018
  • Region: Global
  • Elsevier Science and Technology
  • ID: 5341994

Other books present corporate finance approaches to the venture capital and private equity industry, but many key decisions require an understanding of the ways that law and economics work together. This revised and updated 2e offers broad perspectives and principles not found in other course books, enabling 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.

In the 2e, datasets from over 40 countries are used to analyze and consider limited partnership contracts, compensation agreements, and differences in the structure of limited partnership venture capital funds, corporate venture capital funds, and government venture capital funds. There is also an in-depth study of contracts between different types of venture capital funds and entrepreneurial firms, including security design, and detailed cash flow, control and veto rights. The implications of such contracts for value-added effort and for performance are examined with reference to data from an international perspective. With seven new or completely revised chapters covering a range of topics from Fund Size and Diseconomies of Scale to Fundraising and Regulation, this new edition will be essential for financial and legal students and researchers considering international venture capital and private equity.

Table of Contents

Part I. Introduction 1. Introduction and Overview 2. Agency Costs and Forms of Finance 3. Overview of Institutional Contexts and Empirical Methods

Part II. Fund Structure and Governance 4. Fundraising 5. Limited Partnership Agreements 6. Compensation Contracts 7. Specialized Investment Mandates 8. Style Drift 9. The Role of Government and Alternative Policy Options

Part III. Financial Contracting between Funds and Entrepreneurs 10. The Investment Process 11. Security Design 12. Preplanned Exits and Contract Design 13. Legal Conditions and Venture Capital Governance

Part IV. Investor Effort 14. Investor value-added 15. Contracts and effort 16. Local Bias 17. Portfolio Size 18. Fund Size

Part V. Divestment 19. The Divestment Process 20. Investment Duration 21. Contracts and Exits 22. Returns, Valuation and Disclosure

Part VI. Conclusion and Appendices 23. Summary and Concluding Remarks

Online Appendices Appendix 1: Sample Limited Partnership Fund Agreement Appendix 2: Sample Term Sheet Appendix 3: Sample Shareholder Agreement Appendix 4: Sample Subscription Agreement


Douglas J. Cumming DeSantis Distinguished Professor of Finance and Entrepreneurship, College of Business, Florida Atlantic University - Boca Raton, FL, USA. Douglas Cumming, J.D., Ph.D., CFA, is the DeSantis Distinguished Professor of Finance and Entrepreneurship the College of Business, Florida Atlantic University. His research interests include crowdfunding, venture capital, private equity, hedge funds, entrepreneurship, and law and finance. He is the Managing Editor-in-Chief of the Journal of Corporate Finance (2018-2020) and the incoming Co-Editor-in-Chief of the British Journal of Management (2020-2022). He been a guest editor for over a dozen special issues of top journals. He has published over 180 articles in leading refereed academic journals in finance, management, and law and economics, such as the Academy of Management Journal, Journal of Financial Economics, Review of Financial Studies, Journal of International Business Studies, and the Journal of Empirical Legal Studies. His work has been reviewed in numerous media outlets, including the Chicago Tribune, The Economist, Canadian Business, the National Post, the New York Times, and The New Yorker. Douglas is a regular speaker at academic and industry conferences around the world. He has given recent keynote speeches at the British Academy of Management Corporate Governance Conference, Entrepreneurial Finance Association, Financial Research Network Corporate Finance Conference, French Finance Association, Infiniti Conference on International Finance, Vietnam Symposium in Banking and Finance, the Budapest Liquidity and Financial Markets Conference, and the Humbolt University of Berlin Fintech Conference, among others. Much of Douglas Cumming's work is online at SSRN: http://ssrn.com/author=75390 Sofia A. Johan Assistant Professor of Finance, College of Business, Florida Atlantic University - Boca Raton, FL, USA. Sofia Johan, LL.B (Liverpool), LL.M. in International Economic Law (Warwick), Ph.D. in Law and Economics (Tilburg), is an Assistant Professor of Finance and Fellow, Phil Smith Center for Free Enterprise, at the College of Business, Florida Atlantic University. She is also the AFM Senior Research Fellow at the Tilburg Law and Economics Centre (TILEC) in The Netherlands. Her research is primarily focused on law and finance, market surveillance, hedge funds, venture capital, private equity and IPOs. Her recent publications have appeared in numerous journals including the Journal of Financial Economics, Journal of International Business Studies, American Law and Economics Review, International Review of Law and Economics, Journal of Banking and Finance, European Financial Management, European Economic Review, and Entrepreneurship Theory and Practice, among numerous other journals. Her work has been presented at the American Law and Economics Association, the American Economics Association, European Law and Economics Association, the European Financial Management Association, and other leading international conferences. Prior to winning her Ph.D., she was the head legal counsel at the largest government owned venture capital fund in Malaysia. She has also consulted for a variety of governmental and private organizations in Australasia and Europe. http://ssrn.com/author=370203