English, Article, Journal or magazine article edition: Indulgent angels or stingy venture capitalists? The entrepreneurs' choice LESHCHINSKII, Dima

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Bookmark: http://trove.nla.gov.au/version/23386
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Indulgent angels or stingy venture capitalists? The entrepreneurs' choice
Author
  • LESHCHINSKII, Dima
Physical Description
  • preprint
Notes
  • This paper studies entrepreneurs' choice of investors, who must provide financial capital and effort for projects with externalities. Venture capitalists (VCs) and individual investors (angels) compete to finance the projects. VCs seek to invest into a portfolio of projects, while angels have more slack in how much they invest into one project. In the presence of externalities between projects, VCs can potentially increase the total value of their investment portfolio through better coordination of investment, while some angels behave indulgently and give more financial investment than necessary, earning zero profits in equilibrium. Surprisingly, externalities do not give VCs as much of an advantage as one would expect. Quite often VCs lose out to angels even when this means that some projects will not receive an optimal amount of effort. In the projects they invest in, VCs always make strictly positive profits despite the competition.
  • investment choice; venture capitalist; angel; project financing
  • RePEc:ebg:heccah:0769
Language
  • English
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