Venture Capital Contract Design: An Empirical Analysis of the Connection Between Bargaining Power and Venture Financing Contract Terms

Authors

Spencer Williams, Stanford Law School Program on Corporate Governance and Practice

Keywords

Venture Capital, Contract, Bargaining Power, Finance, Dividends, Pay-to-Play

Abstract

This Article presents an empirical analysis of the connection between bargaining power and contract design using an original dataset of over 5,500 equity and debt venture financings from 2004–2015. Using the total supply of venture capital in the U.S. as a measure of relative bargaining power between entrepreneurs and investors, this Article finds that venture capital supply has a statistically significant relationship with price and non-price terms in both equity and debt financings. These results contradict one of three theoretical accounts of bargaining power and support the other two.

Recommended Citation

Spencer Williams, Venture Capital Contract Design: An Empirical Analysis of the Connection Between Bargaining Power and Venture Financing Contract Terms, 23 FORDHAM J. CORP. & FIN. L. 105 (2017).