Mr. Smith has decided to become a venture capitalist but is concerned about capital losses and a low rate of return. As a result, he needs important information about financial dealings with optimistic entrepreneurs. The need for meaningful information about financial contracts with optimistic entrepreneurs is fueled by the existence of seemingly limited empirical work comparing attributes of real-world financial contracts. In providing Mr. Smith with some important information that would help him as a venture capitalist, it is important to focus on the main areas of financial dealing with optimistic entrepreneurs. Since Smith is already worried about capital losses and lower rate of return, some of the most important information to provide includes the looting of companies by their insiders, the impact of the looting on venture capitalists, mitigation strategies of risk and the potential impacts of strategies. The information should also cover the extent to which the recommended risk mitigation strategies would protect Mr. Smith's capital. Looting of companies by insiders in the United States: Despite greater legal protection for investors in the United States than in any other country worldwide, the looting of companies by their insiders is still a serious problem in the country (Ellingsen & Kristiansen, 2011, p.323). This problem is mainly fueled by the likelihood that a deviation will sometimes occur regarding the transfer from investors to entrepreneurs. However, in the United States the probability that the average transfer from investors to entrepreneurs will occur in the form of illegitimate diversion is still minimal. The minimum relative probability... middle of the paper... plays a role in determining the success and profitability of the business. This is mainly due to the fact that the venture capitalist is the main stakeholder who provides financing for the venture while the entrepreneur is an agent responsible for the day-to-day activities or operations of the business. In conclusion, this report provides an overview of financial bargaining between venture capitalists and optimistic entrepreneurs. The report demonstrates why internal corporate looting is still a major problem in the US despite having the best regulatory measures in the world and the effect of looting on capital losses and lower rate of return. In particular, the main objective of the report is to provide important information to Mr. Smith regarding his concerns about capital losses and lower rate of return due to his decision to become a venture capitalist.