TY  - JOUR
AU  - Jovanovic,Boyan
AU  - Szentes,Balàzs
TI  - On the Return to Venture Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12874
PY  - 2007
Y2  - January 2007
UR  - http://www.nber.org/papers/w12874
L1  - http://www.nber.org/papers/w12874.pdf
N1  - Author contact info:
Boyan Jovanovic
New York University
Department of Economics
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8953
Fax: 212/995-4186
E-Mail: Boyan.Jovanovic@nyu.edu

Balàzs Szentes
Department of Economics
University of Chicago
1126 E. 59th St.
Chicago, IL 60637
E-Mail: szentes@uchicago.edu
AB  - We provide a model that links the high return to venture equity to the impatience of the VCs. VCs are scarce, and hence, they have market power and a high return on their investments. As a result, VCs are eager to terminate non-performing ventures so they can move on to new ones. The scarcity of VCs enables them to internalize their social value, and the competitive equilibrium is socially optimal. We estimate the model and back out the return of solo entrepreneurs which is always below that of the return of VCs.
ER  -