Venture Capital Investment: An Agency Analysis Of Uk Practice

VENTURE CAPITAL INVESTMENT: AN AGENCY ANALYSIS OF PRACTICE Venture capital is a relatively new investment form, especially in the UK and Europe. However, there exists no systematic analysis of what drives investorinvestee relations in venture capital markets using a unified and coherent framework. Venture Capital Investment fills this gap by employing a principalagent framework to provide a contemporary, global analysis of contracting relations practice. By deploying this state of the art framework, Gavin Reid is able to develop a powerful organizing principle for viewing the bewildering complexity of real-world venture capital activity. The principal-agent framework is simply and clearly expounded, and background information on the UK venture capital industry provided, before the reader is presented with the main body of the work. This utilizes in-depth case studies of investor-investee relations, based on extensive empirical research and organized around the principal-agent method, which provide valuable insights into contemporary UK venture capital practice. Venture Capital Investment also considers risk management from the perspective of both contracting parties, information system development post-contract, and the ‘trading’ of risk and information in pursuit of superior contracting between investors and investees. The author concludes by employing the principalagent method both to anticipate trends in UK venture capital activity and prescribe better business practice. Written in a clear and accessible fashion this volume will be an excellent resource for students and instructors of economics and business studies and for all those wanting to know more about the important area of venture capital investment. Gavin C.Reid is Professor in Economics and Director of the Centre for Research into Industry, Enterprise, Finance and the Firm (CRIEFF) at the University of St Andrews. He is a graduate of the Universities of Aberdeen, Southampton, and Edinburgh, and at the latter was awarded his PhD for a thesis on industrial price leadership. Formerly Reader in Economics at the University of Edinburgh, he has held visiting professorships at Queen’s University, Ontario, the University of Denver, Colorado, and the University of Nice, and has been a Visiting Scholar at Darwin College, University of Cambridge. He has published extensively in the academic journals on industrial organization, small firms, microeconomic theory, business ethics, venture capital and intellectual property. He is author of six previous books, including Theories of Industrial Organization (1987), The Small Entrepreneurial Firm (1988) (with L.R.Jacobsen), and Small Business Enterprise (1993). He has been a Leverhulme Trust Research Fellow, and completed this current book while holding a Nuffield Foundation Research Fellowship. VENTURE CAPITAL INVESTMENT An agency analysis of practice Gavin C.Reid London and New York First published 1998 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2003. Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1998 Gavin C.Reid All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record fo