Finance

Business

Archaeology

Investment (military)

Corporate governance

Politics

History

Agency (philosophy)

Epistemology

Shareholder

Social venture capital

Philosophy

Political science

Venture capital

Computer science

Capital (architecture)

Agency cost

Computer security

Asset (computer security)

The Journal of Finance

ABSTRACT This paper examines the structure of staged venture capital investments when agency and monitoring costs exist. Expected agency costs increase as assets become less tangible, growth options increase, and asset specificity rises. Data from a random sample of 794 venture capital‐backed firms support the predictions. Venture capitalists concentrate investments in early stage and high technology companies where informational asymmetries are highest. Decreases in industry ratios of tangible assets to total assets, higher market‐to‐book ratios, and greater R&amp;D intensities lead to more frequent monitoring. Venture capitalists periodically gather information and maintain the option to discontinue funding projects with little probability of going public.

Optimal Investment, Monitoring, and the Staging of Venture Capital