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Assessing the maximum expendable quota for a milestone financing provided by a venture capitalist

Author

Listed:
  • Thomas Hering
  • Christian Toll
  • Polina K. Kirilova

Abstract

In the expansion phase, young ventures often face a financing bottleneck. Initial company owners seek equity partners, usually in their (extended) network. In this paper, we demonstrate how the state marginal quota model under realistic imperfect market conditions can assist company founders striving for venture capital financed growth in the expansion phase. Applying this model, initial company owners can determine the maximum expendable percentage of ownership for a given milestone financing. This paper also shows that under unrealistic perfect market conditions, there is no apparent reason for venture capital to exist.

Suggested Citation

  • Thomas Hering & Christian Toll & Polina K. Kirilova, 2016. "Assessing the maximum expendable quota for a milestone financing provided by a venture capitalist," International Journal of Entrepreneurial Venturing, Inderscience Enterprises Ltd, vol. 8(1), pages 102-117.
    • Handle: RePEc:ids:ijeven:v:8:y:2016:i:1:p:102-117
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    Citations

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    Cited by:

    1. Christian Toll & Jan-Phillipp Rolinck, 2017. "Earn-outs to bridge gap between negotiation parties – curse or blessing?," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 18(1), pages 103-116.
    2. Christian Toll & Olaf Kintzel, 2019. "A nonlinear state marginal price vector model for the task of business valuation. A case study: The dimensioning of IT-service companies under nonlinear synergy effects," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 27(4), pages 1079-1105, December.
    3. Christian Toll & Thomas Hering, 2017. "Valuation of Company Merger from the Shareholders’ Point of View," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 19(46), pages 836-836, August.

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