Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We study the fund-raising strategy of an entrepreneur when investors have private information about his project’s profitability. The entrepreneur cares about monetary profits and about the probability to obtain financing. If he contacts both venture capitalists (VCs) simultaneously, he obtains high monetary profits. If he commits to a period of exclusive negotiation with one VC, he increases the probability to obtain financing but deal terms deteriorate. The optimal negotiation strategy results from this tradeoff. We also solve for the equilibrium financial contracts and obtain implications for VCs’ portfolios and entrepreneurs’ deals.