Venture Capital Contracts Give VCs Control Over Entrepreneur's Fate.
Real-world venture capital contracts allow investors to control different rights like cash flow, voting, and board rights. These rights change based on the company's performance. If the company does well, the entrepreneur gains more control. If it does poorly, the investors take over. The contracts also include provisions to prevent conflicts between the entrepreneur and investor. The contracts observed in the study match existing financial theories by Aghion and Bolton and Dewatripont and Tirole.