The New Exit in Venture Capital - January 2012 paper

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1、1b.Ibrahim_PAGE(DoNotDelete)1/31/20123:23PMVANDERBILTLAWREVIEW_________________________________________________________________VOLUME65JANUARY2012NUMBER1_________________________________________________________________TheNewExitinVentureCapitalDarianM.IbrahimINTRODU

2、CTION.................................................................................2I.THEECONOMICPROBLEMOFLOCK-ININVENTURECAPITAL................................................................................6A.LockinginCapitalorInvestors?........................

3、.........6B.TheMoreExtremeInvestorLock-ininVentureCapital.......................................................................8II.SECONDARYMARKETSINVENTURECAPITAL:DESCRIPTIONANDFRAMEWORKFORANALYSIS....................15A.TheSecondaryMarketforStart-upStock(theDirect

4、Market)..........................................................16B.BenefitsoftheDirectMarket....................................201.IncreasingLiquidity......................................212.ImprovingStart-upGovernance....................243.MitigatingVC-Entrepre

5、neurConflictsOverTraditionalExits..................................27C.TheDirectMarket’sPotentialtoMuteHigh-PoweredIncentives...................................................30AssociateProfessor,UniversityofWisconsinLawSchool.MythankstoBobbyBartlett,BrianBroughman

6、,VicFleischer,JoanHeminway,DougMoll,DonnaNagy,LarryRibstein,BillSjostrom,andGordonSmithfortheirhelpfulcomments.IthankWisconsinlawstudentsMeganArrogante,AdrienneBlais,andAngelaBricklandWisconsinlawlibrarianCherylO’Connorforvaluableresearchassistance.Specialthankstothe

7、participantsinsecondarymarketswhoagreedtobeinterviewedforthisproject.Mypromisesofanonymitypreventmefromnamingthemhere,buttheirinsightswerecrucialtounderstandingthisemergingmarketactivity.Finally,IthankparticipantsattheSearle-KauffmanInstituteonLaw,Innovation,andGrowt

8、hatChapmanLawSchoolandthe2010LawandSocietyAnnualMeetinginChicago.11b.Ibrahim_PAGE(DoNotDelete)1/31/20123:23PM2VANDERBILTLAWREVIEW[V