Venture Capital and Private Equity Contracting

Chapter 11. Security Design

11.1. Introduction and Learning Objectives

The academic venture capital literature is dominated by the view that convertible securities are the optimal form of venture capital finance (see, e.g., Bascha and Walz, 2001a; Berglöf, 1994; Bergmann and Hege, 1998; Casamatta, 2003; Cornelli and Yosha, 2003; Gompers, 1998; Gompers and Lerner, 2001; Hellmann, 2006; Kaplan and Strömberg, 2003; Marx, 1998; Sahlman, 1990; Schmidt, 2003; Trester, 1998; and others). The only empirical support for this proposition around the world is found in U.S.-based research comprising hand-collected datasets with up to 213 observations from U.S. venture capital funds (Bergmann and Hege, 1998; Gompers, 1998; Kaplan and Strömberg, 2003; Sahlman, ...