Document Type
Article
Publication
Stanford Journal of Law, Business & Finance
Year
2016
Citation Information
Brad Bernthal, Investment Accelerators, 21 Stan. J.L. Bus. & Fin. 139 (2016), available at https://scholar.law.colorado.edu/faculty-articles/354.
Abstract
This Article documents and explains the legal and extralegal dimensions of Investment Accelerator (IA) systems. Accelerators are a new class of institution that supports entrepreneurs and early stage startups. Investment Accelerators take an ownership stake in companies that participate in an intensive, time-limited program. Interviews reveal the surprising extent to which parties in many Investment Accelerators exchange economic value in the absence of formal agreement. Startups share proprietary information with highly accomplished mentors who, in turn, contribute their time and connections without direct compensation. This under-contracted and informal arrangement raises concerns about opportunism. Data from an original investigation presents a description of Investment Accelerator organization and its effects. Research reveals three notable findings about how lAs organize resources in the service of innovation objectives. First, Investment Accelerators mingle formal and informal mechanisms to assemble a system of stakeholders that spans an entrepreneurial community. Second, informal mechanisms attract a wider pool of mentor participants, including desirable professionals who would not participate as full time hires or as contributors pursuant to a contract. Third, Investment Accelerators show that, under certain circumstances, informal network governance constrains opportunism, even where a network is rapidly assembled and new entrants are included.
Copyright Statement
Copyright protected. Use of materials from this collection beyond the exceptions provided for in the Fair Use and Educational Use clauses of the U.S. Copyright Law may violate federal law. Permission to publish or reproduce is required.
Included in
Banking and Finance Law Commons, Business Organizations Law Commons, Science and Technology Law Commons
Comments
This is the first part of a two-part investigation into investment accelerators. See Brad Bernthal, Who Needs Contracts? Generalized Exchange Within Investment Accelerators, 110 Marq. L. Rev. 997 (2017).