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This paper develops a theory of the entrepreneurial financing by venture
capitalists. It focuses on the activities of the entrepreneur at the incipiency
of the investment process: namely the solicitation event. The temporal series
of financial commitments elicited from venture capitalists 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 statistical renewal process. The paper
derives limiting conditions on the probability that entrepreneur’s project will
be aborted because of his failure to secure adequate funding commitments in
a finite time. The entrepreneur’s attitude towards risk determines the tradeoff
between the expected aggregate capital commitment and the risk of abortion
of the project.
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