Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses

We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs consider the attractiveness and risks of the business, management, and deal terms as well as expected post-investment monitoring. We then consider the relation of the analyses to the contractual terms. Greater internal and external risks are associated with more VC cash flow rights, VC control rights; greater internal risk, also with more contingencies for the entrepreneur; and greater complexity, with less contingent compensation. Finally, expected VC monitoring and support are related to the contracts. We interpret these results in relation to financial contracting theories.

Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts

In this paper, we compare the characteristics of real world financial contracts to their counterparts in financial contracting theory. We do so by conducting a detailed study of actual contracts between venture capitalists (VCs) and entrepreneurs. We consider VCs to be the real world entities who most closely approximate the investors of theory. (1) The distinguishing characteristic of VC financings is that they allow VCs to separately allocate cash flow rights, voting rights, board rights, liquidation rights, and other control rights. We explicitly measure and report the allocation of these rights. (2) While convertible securities are used most frequently, VCs also implement a similar allocation of rights using combinations of multiple classes of common stock and straight preferred stock. (3) Cash flow rights, voting rights, control rights, and future financings are frequently contingent on observable measures of financial and non-financial performance. (4) If the company performs poorly, the VCs obtain full control. As company performance improves, the entrepreneur retains / obtains more control rights. If the company performs very well, the VCs retain their cash flow rights, but relinquish most of their control and liquidation rights. The entrepreneur's cash flow rights also increase with firm performance. (5) It is common for VCs to include non-compete and vesting provisions aimed at mitigating the potential hold-up problem between the entrepreneur and the investor. We interpret our results in relation to existing financial contracting theories. The contracts we observe are most consistent with the theoretical work of Aghion and Bolton (1992) and Dewatripont and Tirole (1994). They also are consistent with screening theories.

Venture Capitalists As Principals: Contracting, Screening, and Monitoring

Theoretical work on the principal-agent problem in financial contracting focuses on the conflicts of interest between an agent / entrepreneur with a venture that needs financing, and a principal / investor providing funds for the venture. Theory has identified three primary ways that the investor / principal can mitigate these conflicts - structuring financial contracts, pre-investment screening, and post-investment monitoring and advising. In this paper, we describe recent empirical work and its relation to theory for one prominent class of principals venture capitalists (VCs). The empirical studies indicate that VCs attempt to mitigate principal-agent conflicts in the three ways suggested by theory. The evidence also shows that contracting, screening, and monitoring are closely interrelated. In screening, the VCs identify areas where they can add value through monitoring and support. In contracting, the VCs allocate rights in order to facilitate monitoring and minimize the impact of identified risks. Also, the equity allocated to VCs provides incentives to engage in costly support activities that increase upside values, rather than just minimizing potential losses. There is room for future empirical research to study these activities in greater detail for VCs, for other intermediaries such as banks, and within firms.

Differential gene expression associated with postnatal equine articular cartilage maturation

<p>Abstract</p> <p>Background</p> <p>Articular cartilage undergoes an important maturation process from neonate to adult that is reflected by alterations in matrix protein organization and increased heterogeneity of chondrocyte morphology. In the horse, these changes are influenced by exercise during the first five months of postnatal life. Transcriptional profiling was used to evaluate changes in articular chondrocyte gene expression during postnatal growth and development.</p> <p>Methods</p> <p>Total RNA was isolated from the articular cartilage of neonatal (0–10 days) and adult (4–5 years) horses, subjected to one round of linear RNA amplification, and then applied to a 9,367-element equine-specific cDNA microarray. Comparisons were made with a dye-swap experimental design. Microarray results for selected genes (COL2A1, COMP, P4HA1, TGFB1, TGFBR3, TNC) were validated by quantitative polymerase chain reaction (qPCR).</p> <p>Results</p> <p>Fifty-six probe sets, which represent 45 gene products, were up-regulated (p < 0.01) in chondrocytes of neonatal articular cartilage relative to chondrocytes of adult articular cartilage. Conversely, 586 probe sets, which represent 499 gene products, were up-regulated (p < 0.01) in chondrocytes of adult articular cartilage relative to chondrocytes of neonatal articular cartilage. Collagens, matrix-modifying enzymes, and provisional matrix non-collagenous proteins were expressed at higher levels in the articular cartilage of newborn foals. Those genes with increased mRNA abundance in adult chondrocytes included leucine-rich small proteoglycans, matrix assembly, and cartilage maintenance proteins.</p> <p>Conclusion</p> <p>Differential expression of genes encoding matrix proteins and matrix-modifying enzymes between neonates and adults reflect a cellular maturation process in articular chondrocytes. Up-regulated transcripts in neonatal cartilage are consistent with growth and expansion of the articular surface. Expression patterns in mature articular cartilage indicate a transition from growth to homeostasis, and tissue function related to withstanding shear and weight-bearing stresses.</p

Polymer-coated bioactive glass S53P4 increases VEGF and TNF expression in an induced membrane model in vivo

The two-stage induced-membrane technique for treatment of large bone defects has become popular among orthopedic surgeons. In the first operation, the bone defect is filled with poly(methyl methacrylate) (PMMA), which is intended to produce a membrane around the implant. In the second operation, PMMA is replaced with autograft or allograft bone. Bioactive glasses (BAGs) are bone substitutes with bone-stimulating and angiogenetic properties. The aim of our study was to evaluate the inductive vascular capacity of BAG-S53P4 and poly(lactide-co-glycolide) (PLGA)-coated BAG-S53P4 for potential use as bone substitutes in a single-stage induced-membrane technique. Sintered porous rods of BAG-S53P4, PLGA-coated BAG-S53P4 and PMMA were implanted in the femur of 36 rabbits for 2, 4 and 8 weeks. The expression of vascular endothelial growth factor (VEGF) and tumor necrosis factor alpha (TNF) in the induced membranes of implanted materials was analyzed with real-time quantitative polymerase chain reaction and compared with histology. Both uncoated BAG-S53P4 and PLGA-coated BAG-S53P4 increase expression of VEGF and TNF, resulting in higher amounts of capillary beds, compared with the lower expression of VEGF and less capillary beads observed for negative control and PMMA samples. A significantly higher expression of VEGF was observed for PLGA-coated BAG-S53P4 than for PMMA at 8 weeks (p <0.036). VEGF and TNF expression in the induced membrane of BAG-S53P4 and PLGA-coated BAG-S53P4 is equal or superior to PMMA, the "gold standard" material used in the induced-membrane technique. Furthermore, the VEGF and TNF expression for PLGA-coated BAG-S53P4 increased during follow-up.Peer reviewe

Transcriptional profiling differences for articular cartilage and repair tissue in equine joint surface lesions

BACKGROUND: Full-thickness articular cartilage lesions that reach to the subchondral bone yet are restricted to the chondral compartment usually fill with a fibrocartilage-like repair tissue which is structurally and biomechanically compromised relative to normal articular cartilage. The objective of this study was to evaluate transcriptional differences between chondrocytes of normal articular cartilage and repair tissue cells four months post-microfracture. METHODS: Bilateral one-cm2 full-thickness defects were made in the articular surface of both distal femurs of four adult horses followed by subchondral microfracture. Four months postoperatively, repair tissue from the lesion site and grossly normal articular cartilage from within the same femorotibial joint were collected. Total RNA was isolated from the tissue samples, linearly amplified, and applied to a 9,413-probe set equine-specific cDNA microarray. Eight paired comparisons matched by limb and horse were made with a dye-swap experimental design with validation by histological analyses and quantitative real-time polymerase chain reaction (RT-qPCR). RESULTS: Statistical analyses revealed 3,327 (35.3%) differentially expressed probe sets. Expression of biomarkers typically associated with normal articular cartilage and fibrocartilage repair tissue corroborate earlier studies. Other changes in gene expression previously unassociated with cartilage repair were also revealed and validated by RT-qPCR. CONCLUSION: The magnitude of divergence in transcriptional profiles between normal chondrocytes and the cells that populate repair tissue reveal substantial functional differences between these two cell populations. At the four-month postoperative time point, the relative deficiency within repair tissue of gene transcripts which typically define articular cartilage indicate that while cells occupying the lesion might be of mesenchymal origin, they have not recapitulated differentiation to the chondrogenic phenotype of normal articular chondrocytes

Considerations for Studying Sex as a Biological Variable in Spinal Cord Injury

In response to NIH initiatives to investigate sex as a biological variable in preclinical animal studies, researchers have increased their focus on male and female differences in neurotrauma. Inclusion of both sexes when modeling neurotrauma is leading to the identification of novel areas for therapeutic and scientific exploitation. Here, we review the organizational and activational effects of sex hormones on recovery from injury and how these changes impact the long-term health of spinal cord injury (SCI) patients. When determining how sex affects SCI it remains imperative to expand outcomes beyond locomotor recovery and consider other complications plaguing the quality of life of patients with SCI. Interestingly, the SCI field predominately utilizes female rodents for basic science research which contrasts most other male-biased research fields. We discuss the unique caveats this creates to the translatability of preclinical research in the SCI field. We also review current clinical and preclinical data examining sex as biological variable in SCI. Further, we report how technical considerations such as housing, size, care management, and age, confound the interpretation of sex-specific effects in animal studies of SCI. We have uncovered novel findings regarding how age differentially affects mortality and injury-induced anemia in males and females after SCI, and further identified estrus cycle dysfunction in mice after injury. Emerging concepts underlying sexually dimorphic responses to therapy are also discussed. Through a combination of literature review and primary research observations we present a practical guide for considering and incorporating sex as biological variable in preclinical neurotrauma studies