Contracts and exits from a sample of 179 investment rounds in 132 entrepreneurial firms
by 17 European venture capital (VC) funds are analyzed. The data indicate the financial contracts
are quite heterogeneous in terms of both the cash flow and control rights. The use of different
securities by European VC funds does not depend on the definition of venture capital, and the
securities used are not functional equivalents. A normative empirical analysis of exit shows the
likelihood of different types of exit vehicles (IPO, acquisition, and liquidation) and the returns to
venture capital depend on not only firm specific characteristics but also the allocation of cash
flow and control rights.
Keywords: Venture Capital, Financial Contracting, Exit, IPO, Acquisition
JEL Classification: G24, G28, G31, G32, G3
