U.S. Securities and Exchange Commission
NBER Working Papers and Publications
|November 2007||The Impact of Litigation on Venture Capitalist Reputation|
with Vladimir Atanasov, Kate Litvak: w13641
Venture capital contracts give VCs enormous power over entrepreneurs and early equity investors of portfolio companies. A large literature examines how these contractual terms protect VCs against misbehavior by entrepreneurs. But what constrains misbehavior by VCs? We provide the first systematic analysis of legal and non-legal mechanisms that penalize VC misbehavior, even when such misbehavior is formally permitted by contract. We hand-collect a sample of over 177 lawsuits involving venture capitalists. The three most common types of VC-related litigation are: 1) lawsuits filed by entrepreneurs, which most often allege freezeout and transfer of control away from founders; 2) lawsuits filed by early equity investors in startup companies; and 3) lawsuits filed by VCs. Our empirical analysis...
Published: Vladimir Atanasov & Vladimir Ivanov & Kate Litvak, 2007. "The Impact of Litigation on Venture Capitalist Reputation," NBER Chapters, in: Entrepreneurship: Strategy and Structure National Bureau of Economic Research, Inc.