chapter  14
38 Pages

SEEKING OPTIMALITY THROUGH THE EXCHANGING OF RISK AND INFORMATION

A systematic approach has been adopted to examining investor-investee relations in the venture capital world. In the framework established, the venture capital investor (VCI) is the prime mover in contract formulation. However, the deal which is ultimately agreed with the mature small firm (MSF) is mutually voluntary. It is driven by the quest for serving their self-interest on the part of both VCI and MSF. As a consequence, the negotiating and concluding of a contract to give and receive equity capital in return for committing to certain obligations and providing certain services is by itself the seeking of optimality in exchange between VCI and MSF.