Research on the value-added effect of staged financing in venture capital (ID: I-008)

Comparing to upfront investment, venture capitalists would rather choose staged financing in venture capital. The paper explores not only why this approach is employed but also how the contract advantage of staged financing is showed. The research conclusion is that staged financing can take important value-added effect from three aspects as follow: (1) incentive and constrain effect 2) option effect 3) learning effect. These factors make staged financing become a double-win and optimal choose between venture capitalist (VC) and venture entrepreneur (VE), and what is more, it make staged financing convert into a endogenetic contract mechanism with the stage inflow of capital.