Found 19 article(s) for author 'Venture Capital'

VC: An American History

VC: An American History. Tom Nicholas, 2019, Book, “A major exploration of venture financing, from its origins in the whaling industry to Silicon Valley, that shows how venture capital created an epicenter for the development of high-tech innovation. VC tells the riveting story of how the industry arose from the United States’ long-running orientation toward entrepreneurship. Venture capital has been driven from the start by the pull of outsized returns through a skewed distribution of payoffs―a faith in low-probability but substantial financial rewards that rarely materialize. Whether the gamble is a whaling voyage setting sail from New Bedford or the newest startup in Silicon Valley, VC is not just a model of finance that has proven difficult to replicate in other countries. It is a state of mind exemplified by an appetite for risk-taking, a bold spirit of adventure, and an unbridled quest for improbable wealth through investment in innovation.Link

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Tarun Khanna Talks Trust with Knowledge@Wharton

Tarun Khanna Talks Trust with Knowledge@Wharton. Tarun Khanna, February 14, 2019, Audio, “In his book, Professor Khanna discusses the inherent trust that comes with the established customs and institutions of the developed world — through contracts, regulatory bodies, and so on — but this practice is seen less in the developing world. As a result, entrepreneurs looking to work in the developing world must first build a basis of trust with the individuals they’ll be working with if they want to be successful.” Link

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Do Founders Control Start-Up Firms that Go Public?

Do Founders Control Start-Up Firms that Go Public? Jesse Fried, May 2018, Paper, “Startup founders, who generally must cede control to obtain VC financing, are widely believed to regain control in the event of an IPO, à la Facebook’s Mark Zuckerberg. Indeed, the premise that founders expect to be able to reacquire control if there is an IPO underlies the leading finance theory for why venture capital cannot thrive without a robust stock market. But little is known about how frequently founders regain control via IPO. Using a sample of over 18,000 VCbacked firms, we show that founders generally do not reacquire control via IPO. In almost 60% of firms that go public, the founder is no longer CEO at IPO.Link

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Venture Capital Data: Opportunities and Challenges

Venture Capital Data: Opportunities and Challenges. Josh Lerner, 2017, Book Chapter, “Start-ups and other entrepreneurial ventures make a significant contribution to the US economy, particularly in the tech sector, where they comprise some of the largest and most influential companies. Yet for every high-profile, high-growth company like Apple, Facebook, Microsoft, and Google, many more fail. This enormous heterogeneity poses conceptual and measurement challenges for economists concerned with understanding their precise impact on economic growth.Link

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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

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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

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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

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Pay Now or Pay Later? The Economics within the Private Equity Partnership

Pay Now or Pay Later? The Economics within the Private Equity Partnership. Victoria Ivashina, Josh Lerner, March 26, 2016, Paper. “The article focuses on the importance of equity partnerships that are essential to the professional service and investment sectors. It examines private equity partnerships and shows that the allocation of fund economics to individual partners is divorced. It mentions that departures of senior partners have negative effects on the ability of funds to raise additional capital.Link

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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

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Inside Rounds and Venture Capital Returns

Inside Rounds and Venture Capital Returns. Matthew Rhodes-Kropf, December 27, 2015, Paper. “We study sequential investment decisions in the venture capital (VC) industry. VC-backed companies typically need to raise several rounds of funding from VC funds. The decision whether to provide further funding to the company and the terms of the new funding determine VC fund returns. We show that investment outcomes in the VC industry can be predicted by whether a round of funding is provided by only VCs who previously invested in the firm, or new VCs join the syndicate of investors. With asymmetric information, financial intermediaries are often thought to “hold up” firms and earn rents on their inside knowledge. However, we show that inside rounds, in which only existing investors participate, lead to a higher likelihood of failure, lower probability of IPOs, and lower cash on cash multiples than rounds with new investors. Inside rounds also appear to be negative NPV, suggesting that investors make inefficient continuation decisions …Link

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