Venture capital, staged financing and optimal funding policies under uncertainty

Lukas, Elmar; Mölls, Sascha H.; Welling, Andreas

doi:10.1016/j.ejor.2015.10.051

Cited by 43 publications

(20 citation statements)

References 33 publications

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“…Based on the foregoing analysis, VC will be in accordance with the principle of their own utility maximization to choose the endeavor level and the moral hazard level according to equation (6) and (7); VE will be in accordance with the principle of their own utility maximization to choose the endeavor level and the moral hazard level according to equation (8) and (9).…”

Section: F Results and Discussion Of The Gamementioning

confidence: 99%

“…Lukas, E (2016) presented a dynamic model of entrepreneurial venture financing under uncertainty based on option exercise games between an entrepreneur and a venture capitalist. They analyzed the impact of multi-staged financing and both economic and technological uncertainty on optimal contracting in the context of VCfinancing [8].These highly specialized research provided a good basis for a comprehensive and systematic analysis of venture capital, and provided a reference for the present study.…”

Section: Introductionmentioning

confidence: 99%

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A Comprehensive Analysis of Venture Capital Double Game

Jixia¹,

Lyu²,

Teng-fei³

2017

Proceedings of the 2017 International Conference on Management, Education and Social Science (ICMESS 2017)

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Abstract-This study aims to search for the strategy basis and influencing factors of investors, venture capitalists and entrepreneurs in venture capital, so as to promote the healthy development of the venture capital industry through corresponding institutional arrangements. We make a comprehensive game model between investors, venture capitalists and entrepreneurs to specifically analyze the strategies and game results of them. Investors, venture capitalists and entrepreneurs' strategy choice directly influence the efficiency of venture capital operation and the development of venture capital industry. The study obtains the game solution under different situations, and finds out the main influencing factors as follows: the environmental factor, the capacity of VC and VE, the moral quality of VC and VE, the revenue ratio, the share dividend ratio, the supervision strength, the punishment strength and the enforcement strength, the reputation mechanism and so on. We propose changing the value of the major factors through institutional arrangements to optimize game results.

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Section: F Results and Discussion Of The Gamementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

A Comprehensive Analysis of Venture Capital Double Game

Jixia¹,

Lyu²,

Teng-fei³

2017

Proceedings of the 2017 International Conference on Management, Education and Social Science (ICMESS 2017)

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“…In another study, Lukas et al [81] divided the financing stages of venture capital into three main stages. The first stage is dedicated to financing the R&D phase, which deals with the period of converting an idea into the prototype, consisting the market analysis and providing the business plan.…”

Section: The Stages Of Ntbfs Growthmentioning

confidence: 99%

“…According to the characteristics of technology-based firms and clarity and simplicity of stages in the research of Lukas et al [81], the current paper, also uses their categorization to distinguish the growth stages of NTBFs. Regarding the definition of private and market risks, the first two stages are considered as the private risk, and the commercialization stage is relevant to the market risk.…”

Section: The Stages Of Ntbfs Growthmentioning

confidence: 99%

Technology valuation of NTBFs in the field of cleaner production with regard to the investors’ flexibilities and uncertainties in public policy

2019

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Technology valuation, especially in the early stages of new technology-based firms (NTBFs) growth is one of the most critical challenges, which most often hinders the investor and entrepreneur's deals during the venture capital (VC) financing process. It is clear that uncertainties arising from the likelihood of implementing public policies could significantly affect the volatility of NTBFs cash flows in the field of cleaner production. Commonly, these kinds of technologies require public supportive policies for achieving success. Consequently, their technology valuation is more challenging and traditional valuation methods are not suitable anymore because of the definitive assumption of cash flow and ignoring the investors' flexibilities and uncertainties. Therefore, this paper proposes a method by introducing a framework based on the decision tree and the real options analysis which is tailored to meet the technology valuation of such firms during all stages of their growth. Furthermore, unlike previous papers that have utilized the compound options, option to choose has been used to apply investors' flexibilities. Then, the proposed framework is supported by a case study, which has been conducted to verify and validate it. Finally, the conclusion section discusses the contributions and limitations of the study and provides directions for future research.

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“…In the literature, Pennings and Lint (1997) study the empirical option value of an R&D project, and model the arrivals of new information that impact cash flows by exponential random variables. Lukas et al (2016) propose an entrepreneurial venture financing model without competition risk by combining compound option pricing with sequential non-cooperative contracting. Kort and Wrzaczek (2015) apply a game-theoretic approach to study the incumbent's over or under investment problem accounting for the threat of entry.…”

Section: Introductionmentioning

confidence: 99%

Timing Options for a Startup with Early Termination and Competition Risks

Leung

2016

SSRN Journal

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This paper analyzes the timing options embedded in a startup firm, and the associated market entry and exit timing decisions under the exogenous risks of early termination and competitor's entry. Our valuation approach leads to the analytical study of a non-standard perpetual American installment option nested with an optimal sequential stopping problem. Explicit formulas are derived for the firm's value functions. Analytically and numerically, we show that early termination risk leads to earlier voluntary entry or exit, and the threat of competition has a non-trivial effect on the firm's entry and abandonment strategies.

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Venture capital, staged financing and optimal funding policies under uncertainty

Cited by 43 publications

References 33 publications

A Comprehensive Analysis of Venture Capital Double Game

A Comprehensive Analysis of Venture Capital Double Game

Technology valuation of NTBFs in the field of cleaner production with regard to the investors’ flexibilities and uncertainties in public policy

Timing Options for a Startup with Early Termination and Competition Risks

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