Found 21 article(s) for author 'Ramana Nanda'

Coordination Frictions in Venture Capital Syndicates

Coordination Frictions in Venture Capital Syndicates. Ramana Nanda, Matthew Rhodes-Kropf, April 11, 2017, Paper, “An extensive literature on venture capital has studied asymmetric information and agency problems between investors and entrepreneurs, examining how separating entrepreneurs from the investor can create frictions that might inhibit the funding of good projects. It has largely abstracted away from the fact that a startup typically does not have just one investor, but several VCs that come together in a syndicate to finance a venture. In this chapter, we therefore argue for an expansion of the standard perspective to also include frictions within VC syndicates.Link

Tags: , , , ,

Can Paying Firms More Quickly Affect Aggregate Employment

Can Paying Firms More Quickly Affect Aggregate Employment. Ramana Nanda, January 2017, Paper, “We study the impact of Quickpay, a federal reform that indefinitely accelerated payments to small business contractors of the U.S. government. Despite treated firms being paid just 15 days sooner, we find a strong direct effect of the reform on county-sector employment growth. Importantly, however, we also document substantial crowding out of non-treated firms’ employment within local labor markets. While the overall net employment effect was positive, it was close to zero in tight labor markets – where direct effects were weaker and crowding out stronger. Our results highlight an important channel for alleviating financing constraints in small firms, but also emphasize the general-equilibrium effects of large-scale interventions, which can lead to lower aggregate outcomes depending on labor market conditions.Link

Tags: , , , ,

The Persistent Effect of Initial Success: Evidence from Venture Capital

The Persistent Effect of Initial Success: Evidence from Venture Capital. Ramana Nanda, 2017, Paper, “We used data on individual investments in the portfolios of venture capital firms to study persistence in their performance. Each additional IPO among a VC’s first five investments predicted a 13% higher IPO rate for its subsequent 50 investments. Roughly half of this performance persistence stemmed from investment “styles”?investing in particular regions and industries. We found no evidence of performance persistence stemming from a differential ability to select or govern portfolio companies. Rather, our results suggest that early success in venture investing yields better deal ow in subsequent investments, thereby perpetuating differences in the outcomes of initial investments.Link

Tags: , , ,

Can Paying Firms Quicker Affect Aggregate Employment?

Can Paying Firms Quicker Affect Aggregate Employment? Ramana Nanda, July 2016, Paper. “In 2011, the federal government accelerated payments to their small business contractors, spanning virtually every county and industry in the US. We study the impact of this reform on county-sector employment growth over the subsequent three years. Despite firms being paid just 15 days sooner, we find payroll increased 10 cents for each accelerated dollar, with two-thirds of the effect coming from an increase in new hires and the balance from an increase in earnings. Importantly, however, we document substantial crowding out of non-treated firms employment, particularly in counties with low rates of unemployment. Our results highlight an important channel through which financing constraints can be alleviated for small firms, but also emphasize the general-equilibrium effects of large-scale interventions, which can lead to a substantially lower net impact on aggregate outcomes …” Link



Tags: , ,

Financing High-Potential Entrepreneurship

Financing High-Potential Entrepreneurship. Ramana Nanda, April 2016, Paper. “Entrepreneurship is essential to job creation and to productivity growth and therefore is an important matter for government policy. However, policymakers face a difficult challenge because successful growth for a few firms—which cannot easily be identified in advance—is accompanied by widespread failure for most other new firms. Predicting which firms will fail and which will succeed is nearly impossible. Instead of futilely trying to pick winners, governments can play a useful role in facilitating the growth of the most promising firms by setting the conditions for efficient trial-and-error experimentation across firms.Link

Tags: , , , ,

Financing Risk and Innovation

Financing Risk and Innovation. Ramana Nanda, Matthew Rhodes-Kropf, March 2016, Paper, “We provide a model of investment in new ventures that demonstrates why some places, times, and industries should be associated with a greater degree of experimentation by investors. Investors respond to financing risk, a forecast of limited future funding, by modifying their focus to finance less innovative firms. In equilibrium, financing risk disproportionately impacts innovative ventures with the greatest real option value by creating a trade-off between protecting the firm from financing risk and maximizing its real option value. We propose that extremely novel technologies may need ‘hot’ financial markets to get through the initial period of discovery or diffusion. This paper was accepted by Gustavo Manso, finance.Link

Tags: , , , , ,

Regional Variation in Venture Capital: Causes and Consequences

Regional Variation in Venture Capital: Causes and Consequences. Ramana Nanda, Matthew Rhodes-Kropf, March 22, 2016, Book Chapter. “Entrepreneurship is a central element of the Schumpeterian process of creative destruction (Schumpeter, 1942). Startups have been associated with the birth of important new industries such as semiconductors and computers, the internet and biotechnology, and there is increasing evidence of the important role that startup firms play in driving aggregate productivity growth in the economy (Aghion and Howitt, 1992; King and Levine, 1993; Foster et al., 2008).Link

Tags: , , , , ,

Cost of Experimentation and the Evolution of Venture Capital

Cost of Experimentation and the Evolution of Venture Capital. Ramana Nanda, Matthew Rhodes-Kropf, December 2015, Paper. “We study adaptation by financial intermediaries as a response to technological change in the context venture-capital finance. Using a theoretical model and rich data, we are able to both document and provide a framework to understand the changes in the investment strategy of VCs in recent years – an increased prevalence of investors who “spray and pray” – providing a little funding and limited governance to an increased number of startups that they are more likely to abandon, but where early experiments significantly inform beliefs about the future potential of the venture. We also highlight how this adaptation by financial intermediaries has altered the trajectory of aggregate innovation away from complex technologies where initial experiments cost more towards those where information on future prospects is revealed quickly and cheaply …Link

Tags: , , , ,

Is a Start-Up’s Strength Becoming Its Weakness?

Is a Start-Up’s Strength Becoming Its Weakness? Ramana Nanda, November 1, 2015, Article. “The creators of the start-up AndFound, an online platform that connects angel investors with a curated selection of promising start-ups, have a towering advantage over similar business accelerators: The site is free. But this central tenet of the company’s mission presents problems as the company looks ahead and considers options for a long-range business model to monetize its services. Expert commentary comes from Kevin Laws, COO of AngelList, a website that connects entrepreneurs with angel investors, and Jennifer Lum, an angel investor, entrepreneur…Link

Tags: ,

House Money and Entrepreneurship

House Money and Entrepreneurship. William Kerr, Ramana Nanda, August 2015, Paper. “We examine the relationship between house prices and entrepreneurship using micro data from the US Census Bureau. Increases in house prices are often thought to drive entrepreneurship through unlocking the collateral channel for bank loans, but this interpretation is challenged by worries regarding omitted variable biases (e.g., rising local demand) or wealth effects (i.e., that people with more valuable homes are more likely to enter entrepreneurship for reasons other than access to collateral). We construct an empirical environment…” Link

Tags: , , ,