An ergodic theory of venture capital solicitation

The temporal series of financial commitments elicited from venture capitalists (VCs) are assumed to have the characteristics of random variables. It is shown that the aggregate capital commitment secured by an entrepreneur in a finite time has stochastic properties corresponding to those of a renewal process. The paper derives the limiting conditions on the probability that a project will be aborted because of the entrepreneur's inability to secure adequate funding commitments in a finite time. The collective attitude towards risk of the entrepreneurial group will determine the tradeoff between the expected aggregate capital commitment and the risk of abortion of the project.