Firm valuation in venture capital financing rounds: the role of investor bargaining power
Heughebaert, Andy Manigart, Sophie
Heughebaert, Andy
Manigart, Sophie
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2012
Journal
Journal of Business Finance and Accounting
Book
Publication Volume
39
Publication Issue
3/4
Publication Begin page
500
Publication End page
530
Publication NUmber of pages
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Abstract
theories mentioned in research on executive compensation to each of these paradigms
This study explores the impact of bargaining power of venture capital (VC) firms on the valuation of their portfolio companies. We argue that VC firm types with greater bargaining power vis-Ã -vis the entrepreneur negotiate lower valuations compared to VC firm types with less bargaining power. We find that VC firm types with stronger bargaining power, namely university and government VC firms, value investments lower compared to independent VC firms. The valuations of captive VC firms equal those of independent VC firms. Our findings suggest that valuations in the VC contract reflect the relative bargaining power of the VC investor.
This study explores the impact of bargaining power of venture capital (VC) firms on the valuation of their portfolio companies. We argue that VC firm types with greater bargaining power vis-Ã -vis the entrepreneur negotiate lower valuations compared to VC firm types with less bargaining power. We find that VC firm types with stronger bargaining power, namely university and government VC firms, value investments lower compared to independent VC firms. The valuations of captive VC firms equal those of independent VC firms. Our findings suggest that valuations in the VC contract reflect the relative bargaining power of the VC investor.
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Keywords
Accounting & Finance, Financial Services Management, Financial Services Management