482 P. Gompers
Abstract
Venture capital has emerged as an important intermediary in financial markets, provid-
ing capital to young high-technology firms that might have otherwise gone unfunded.
Venture capitalists have developed a variety of mechanisms to overcome the problems
that emerge at each stage of the investment process. At the same time, the venture cap-
ital process is also subject to various pathologies from time to time, which can create
problems for investors or entrepreneurs. This handbook chapter reviews the recent em-
pirical literature on these organizations and points out area where further research is
needed.
Keywords
venture capital, agency costs, optimal contracting, capital constraints monitoring