Works in Progress
Due to moral hazard issues, entrepreneurs need to post collateral in exchange for financing (Holmstrom and Tirole 1997). However, most venture-funded startups start their business with little collateral. This paper explains this phenomenon by elaborating on the idea of standardization (Rajan 2012). Venture capitalists provide human capital and invest in intangible capital to embed entrepreneur's idea in an organization with transferrable going concern value, therefore reducing the amount of collateral required upfront. One of the results is that due to the limited supply of VC human capital, only the high productivity entrepreneurs will be selected.
Venture-Funded Firms: an Organizational Capital View
This paper seeks to quantify venture capitalists' (VC) effort in startups beyond financing. Using the concept of organizational capital from the intangible capital literature, and merging together VentureXpert, Compustat, and the World Management Survey, we ask the following questions: 1) How does the stock of organizational capital compare between venture- versus non-venture-funded firms? 2) Do VCs bring higher management quality to startups? 3) Do more experienced VCs bring higher levels organizational capital and quality of management to startups?
Overcoming Financing Constraints for Entrepreneurship: a Lottery Experiment
Literature has shown that financing constraint is an important factor for entrepreneurial decision. This paper shows that lottery prizes could be a better instrument than inheritances or housing prices, in a country where most of the people participate in the lottery sector. Using empirical moments from the Norwegian economy, this paper simulates an incomplete market model with occupational choice between entrepreneurs and workers and a lottery sector. Results show that financial frictions is important and there will be an increase in the entry rate to entrepreneurship.