Affiliation:
1. Purdue University
2. Harvard University and NBER
3. University of Pennsylvania
Abstract
Abstract
“Founder-friendly” venture financings and nontraditional venture investors have both flourished over the past decade. Using detailed contract data, we study open-end mutual funds investing in private venture-backed firms. We posit that conflicts between early-stage venture investors and liquidity-constrained later-stage ones influence the classic agency problems affecting entrepreneurs and investors. We find that mutual funds with more stable funding are more likely to invest in private firms and that financing rounds with mutual fund participation have stronger redemption, stronger IPO-related rights, and less board representation. These findings are consistent with our conceptual framework.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
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