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Deal Structuring in Venture Capital Financing
Mosiyevych O. O.

Mosiyevych, Olena O. (2019) “Deal Structuring in Venture Capital Financing.” Business Inform 5:169–173.
https://doi.org/10.32983/2222-4459-2019-5-169-173

Section: Finance, Money Circulation and Credit

UDC 336

Abstract:
The aim of the article is to study the frequency and flexibility of the use of contractual conditions by investors in financing venture projects. A comprehensive research on making investment decisions in financing venture projects was conducted, and a survey of 31 investors in venture projects, including the issues of deal structuring in venture capital financing, was carried out. The respondents of the survey indicated the frequency of using contractual conditions in the venture capital financing and flexibility in their application. According to the results of the survey, the least flexible contractual conditions for investors are anti-dilution protection, pro-rata rights and vesting. The conditions which are the most flexible for investors are control over the board of directors, investment valuation. It can be noticed that, according to the research, domestic investors are less inclined to use certain contractual conditions: redemption rights or cumulative dividends but more often use pro-rata rights, participation rights and liquidation preference.

Keywords: venture financing, deal structuring, making investment decisions, risk management.

Fig.: 4. Bibl.: 12.

Mosiyevych Olena O. – Applicant, Department of Finance, National University of Kyiv-Mohyla Academy (2 Skovorody Str., Kyiv, 04655, Ukraine)
Email: [email protected]

List of references in article

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Kaplan, S. N., and Stromberg, P. E. “Venture Capitalists as Principals: Contracting, Screening, and Monitoring (April 2001)“. NBER Working Paper no. w8202. https://ssrn.com/abstract=265297
Norton, E., and Tenenbaum, B. “The effects of venture capitalists' characteristics on the structure of the venture capital deal“. Journal of Small Business Management, vol. 31 (1993): 32-41.
Payne, G. T. et al. “The deal structuring stage of the venture capitalist decision-making process: exploring confidence and control“. Journal of Small Business Management, vol. 47 (2) (2009): 154-179.
Pistor, K., Raiser, M., and Gelfer, S. “Law and Finance in Transition Economies“. In CID Working Papers. Center for International Development at Harvard University, 2000.
Sahlman, W. “The Structure and Governance of Venture-Capital Organizations“. Journal of Financial Economics, vol. 27, no. 2 (1990): 473-521.
Sapienza, H. J., and Gupta, A. K. “Impact of agency risks and task uncertainty on venture capitalist-CEO interaction“. Academy of Management Journal, vol. 37, no. 6 (1994): 1618-1632.

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