It is well-known in the VC literature that VCs should provide so-called value-adding activities that nurture their venture companies. This paper presents a model of the VC market that takes account of the so-called carried interest on the choice of the risk level and actions. We determine the optimal actions of the fund managers and what would be the desired actions of the fund’s investors. Conflicts of interest between the parties will be documented. [ABSTRACT FROM AUTHOR]
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