NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rosemarie Ziedonis

Questrom School of Business
Boston University
595 Commonwealth Avenue
Boston, MA 02215
Tel: 617/358-3572

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NBER Program Affiliations: PR
NBER Affiliation: Research Associate

NBER Working Papers and Publications

October 2014Patent Collateral, Investor Commitment, and the Market for Venture Lending
with Yael V. Hochberg, Carlos J. Serrano: w20587
The use of debt to finance risky entrepreneurial-firm projects is rife with informational and contracting problems. Nonetheless, we document widespread lending to startups in three innovation-intensive sectors and in early stages of development. At odds with claims that the secondary patent market is too illiquid to shape debt financing, we find that intensified patent trading increases the annual rate of startup lending, particularly for startups with more redeployable (less firm-specific) patent assets. Exploiting differences in venture capital (VC) fundraising cycles and a negative capital-supply shock in early 2000, we also find that the credibility of VC commitments to refinance and grow fledgling companies is vital for such lending. Our study illuminates friction-reducing mechanisms ...
 
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