D. Gordon Smith, 𝘝𝘦𝘯𝘵𝘶𝘳𝘦 𝘊𝘢𝘱𝘪𝘵𝘢𝘭 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘪𝘯𝘨 𝘪𝘯 𝘵𝘩𝘦 𝘐𝘯𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯 𝘈𝘨𝘦, 2 J. SMALL & EMERGING BUS. L., 133 (1998).
Most venture capitalists provide services to their portfolio companies beyond capital investment. Although these services form an important part of the bargain between the venture capitalists and the entrepreneur, they are rarely specified or even capable of specification in venture capital contracts. This article examines the moral hazard and adverse selection problems facing entrepreneurs who hire venture capitalists to provide value-added services and describes the role of the market for venture capitalist reputation in addressing those problems. Further, the Article speculates about whether advances in information technology - specifically, the World Wide Web - are likely to improve the efficiency of the market for venture capitalist reputation.
For "Financing Innovation" sponsored by Lewis & Clark School, Portland, Oregon on September 26, 1997.
Journal of Small & Emerging Business Law