Optimal Investment, Monitoring, and the Staging of Venture Capital.¶
GOMPERS, P. A. (1995). Optimal Investment, Monitoring, and the Staging of Venture Capital. Journal of Finance, 50(5), 1461-1489.
Cited by¶
2 citations across 2 artifacts.
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Primes¶
- Stage Gate Process
- The partitionable commitment is the total capital a startup would need to reach profitability; instead of writing one cheque, investors slice it into pre-seed, seed, Series A, B, and C stages, each a bounded segment of company-building that produces evidence — a working prototype, then early users, then revenue retention, then unit economics, then scalable growth.
This sourceEstablishes staged venture financing as evidence-gated escalating commitment with high inter-round attrition.
- The partitionable commitment is the total capital a startup would need to reach profitability; instead of writing one cheque, investors slice it into pre-seed, seed, Series A, B, and C stages, each a bounded segment of company-building that produces evidence — a working prototype, then early users, then revenue retention, then unit economics, then scalable growth.
Mechanisms¶
- Resource Tranche
- Tranching helps when a resource is scarce, its productive use is uncertain, and dumping it all at once would overwhelm or be wasted — staging against milestones ties commitment to real absorption and preserves the option to stop, which is the core value of staged financing under uncertainty.
This sourceShows that staged venture financing responds to information uncertainty by preserving the option to discontinue weak projects.
- Tranching helps when a resource is scarce, its productive use is uncertain, and dumping it all at once would overwhelm or be wasted — staging against milestones ties commitment to real absorption and preserves the option to stop, which is the core value of staged financing under uncertainty.
Verification¶
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