Assessing the maximum expendable quota for a milestone financing provided by a venture capitalist
by Thomas Hering; Christian Toll; Polina K. Kirilova
International Journal of Entrepreneurial Venturing (IJEV), Vol. 8, No. 1, 2016

Abstract: In the expansion phase, young ventures often face a financing bottleneck. Initial company owners seek equity partners, usually in their (extended) network. In this paper, we demonstrate how the state marginal quota model under realistic imperfect market conditions can assist company founders striving for venture capital financed growth in the expansion phase. Applying this model, initial company owners can determine the maximum expendable percentage of ownership for a given milestone financing. This paper also shows that under unrealistic perfect market conditions, there is no apparent reason for venture capital to exist.

Online publication date: Thu, 28-Jan-2016

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