Abstract
Using a hand-collected sample of contracts and investment proposals from German venture capital (VC) financing relationships, we find that experienced and or private law/independent VC firms rely to a lesser degree on debt financing and more on certain covenants in VC contracting even when we control for direct risk indicators as introduced by Kaplan and Stromberg (2004). However, risk indicators determine VC contracting even when differences in VC types are taken into account. Differences in risk perception across different VC types are not as pronounced as differences in contracting. This may imply that different VC types are primarily distinguished from each other by their respective capability of avoiding negative incentive effects of too tight contracting arrangements and only secondarily by their subjective evaluation of the relevance of certain incentive problems.
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