Business Scholarship Podcast Ep.251 – Gad Weiss on VC Pay-to-Play
Jul 15, 2025
Gad Weiss, a Fellow in law and business at NYU School of Law, dives into the world of venture capital with a focus on his article about pay-to-play clauses. He elaborates on how these clauses secure investor commitment, especially during tough financial times for startups. The discussion covers their rising relevance in today's marketplace, the legal implications under Delaware law, and the potential for investor discrimination. Gad also shares insights on research methodologies around startups, revealing key findings that impact the funding landscape.
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What Are Pay-to Clauses?
- Pay-to clauses ensure investors keep supporting startups with new capital as needed.
- They punish investors who refuse to invest further, helping startups secure ongoing funding.
Market Trends Affect Pay-to Usage
- Pay-to clauses are more common when venture markets cool down and startups face distress.
- Their usage rose post-dot-com bubble and surges during current market downturns, signaling market conditions.
Studying Startups Through IPO Data
- To empirically study startups, Weiss focused on those that later went public using SEC Edgar data.
- This method improves data reliability but biases toward relatively successful startups.