毓秀讲堂 |【Seminar 预告】 No.644--Martin Szydlowski (HKUST)

We provide a theory of founder-friendliness in startups. An informed entrepreneur,who enjoys private benefits of control, proposes either a new or a conventional project.The VC chooses which project to finance and can intervene to replace the entrepreneurin the interim. In equilibrium, the entrepreneur seeks to minimize the likelihood of in-tervention and recommends the new project even if she knows it will fail. We show thatmore intervention by the VC worsens project choice, whereas lax monitoring improvesit. Competition among VCs improves project choice but does not necessarily lead tofounder-friendliness. We characterize implications for information acquisition, controlrights, outside directors, and stage financing.