Efficient venture capital financing combining debt and equity


I present a model of venture capital contracting in which contracts that involve a mixture of both debt and equity are efficient and dominate pure-equity and pure-debt financing. The optimal contract balances the venture capitalist's incentive to intervene in the project and the entrepreneur's desire for control.

This is a preview of subscription content, access via your institution.

Author information



Additional information

Received: 9 September 1997 / Accepted: 3 April 1998

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Marx, L. Efficient venture capital financing combining debt and equity. Rev Econ Design 3, 371–387 (1998). https://doi.org/10.1007/s100580050022

Download citation

  • JEL classification: G24, G32 Key words:Venture capital financing, convertible preferred equity