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  • Negotiating equity share and management control of the entrepreneurial new venture

    Author(s)
    Douglas, EJ
    Carlsson-Wall, M
    Hjelström, T
    Griffith University Author(s)
    Douglas, Evan
    Year published
    2014
    Metadata
    Show full item record
    Abstract
    The valuation of entrepreneurial start-ups for the purpose of equity allocation to business angel investors is an enduring point of discord between the contracting parties. Lack of information and lack of trust, plus the asymmetry of both information and trust between the parties, typically cause the investor to apply a higher risk premium and argue for a larger share of the firm's equity than the entrepreneur deems reasonable. Recent literature on interpersonal trust and the inclusion of management controls is incorporated into a conceptual model to examine the potential for a win-win situation based on information provision ...
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    The valuation of entrepreneurial start-ups for the purpose of equity allocation to business angel investors is an enduring point of discord between the contracting parties. Lack of information and lack of trust, plus the asymmetry of both information and trust between the parties, typically cause the investor to apply a higher risk premium and argue for a larger share of the firm's equity than the entrepreneur deems reasonable. Recent literature on interpersonal trust and the inclusion of management controls is incorporated into a conceptual model to examine the potential for a win-win situation based on information provision and trust building during the negotiation process. Although the entrepreneur and investor may begin with widely divergent ambit claims, hearing and discussing the other's perspectives will redress information asymmetries, build mutual trust and produce a win-win situation for both parties.
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    Journal Title
    Venture Capital
    Volume
    16
    Issue
    4
    DOI
    https://doi.org/10.1080/13691066.2014.970334
    Subject
    Marketing not elsewhere classified
    Banking, Finance and Investment
    Business and Management
    Publication URI
    http://hdl.handle.net/10072/68915
    Collection
    • Journal articles

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