Document Type
Article
Publication
Marquette Law Review
Year
2017
Citation Information
Brad Bernthal, Who Needs Contracts? Generalized Exchange Within Investment Accelerators, 100 Marq. L. Rev. 997 (2017), available at https://scholar.law.colorado.edu/faculty-articles/722.
Abstract
This Article investigates why an expert volunteers on behalf of startups that participate in a novel type of small venture capital (“VC”) fund known as a mentor-driven investment accelerator (“MDIA”). A MDIA organizes a pool of seasoned individuals – called “mentors” – to help new companies. An obvi- ous organizational strategy would be to contract with mentors. Mentors in- stead voluntarily assist. Legal studies of norm-based exchanges do not explain what this Article calls the “mentorship conundrum”—i.e., the puzzling moti- vation of a mentor to volunteer within otherwise for-profit environments. This Article is the first to bridge the insights of generalized exchange theory with law and entrepreneurship. Generalized exchange, which describes systems when benefits are not directly returned by a recipient but by another member of a group, best explains how MDIAs induce volunteerism. Original research reveals that the absence of contract promotes a feeling of altruism while facili- tating economically valuable aspects of mentor / startup interaction. Mentors realize indirect benefits that function as a consideration surrogate. Mentor re- wards include reputation gains, learning benefits, and enhanced professional connections. The MDIA provides a study of how pro-social information shar- ing occurs in a commercial setting.
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.
Comments
"This is the second part of a two-part investigation into investment accelerators. A companion article examines opportunism issues where participants openly share information amid informal accelerator environments. See Brad Bernthal, Investment Accelerators, 22 Stan. J.L. Bus.& Fin. 139 (2016)."