Time: 14:00-15:30, Friday, July 3, 2026

Venue: Guoshun Campus, Room 224, Siyuan Building

Host: Professor Kemin Wang Department of Finance

Topic: Multilateral Contracting in Stage Financing

Speaker: Associate Professor Yunzhi Hu, UNC Kenan-Flagler Business School

Abstract: Venture capital financing typically features complex securities and staging. We develop a dynamic contracting model where an entrepreneur seeks financing from active investors (who provide costly monitoring and screening) and passive investors (who offer cheaper capital). Under multilateral moral hazard, we show that optimal contracts can be implemented through sequential offerings of common and preferred equity, options, warrants, and a combination of senior debt and credit lines (venture debt), including the allocation of termination rights. Our model predicts when entrepreneurs optimally separate monitoring and screening across multiple active investors (“rounds financing”) versus consolidating these functions with a single active investor (“milestone financing”). Rounds financing dominates when informed capital is scarce; milestone financing dominates for riskier and more innovative projects. Finally, our model has implications for the composition of venture capital syndicates.

Bio: Yunzhi Hu is currently an Associate Professor of Finance at UNC Kenan-Flagler Business School. His research interests include financial intermediation, corporate finance, and macro finance. He received his Ph.D. in Finance from the University of Chicago in 2017, and his B.A. in Economics and B.S. in Mechanical Engineering from Peking University. His work has been published in the JF, JFE, RFS, JFQA, and JET, among others.