Download or read book Essays in Venture Capital Entrepreneurship and Managerial Success written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter of my dissertation examines the preferences of venture capitalists for syndication partners. Heterogeneity among syndication partners may cause efficiency loss and increase transaction costs but offer syndication partners valuable learning opportunities in the long run, suggesting a tradeoff between the short-term costs versus long-term benefits. Using data on U.S. venture capital investments, I find that venture capital firms are less likely to syndicate with partners who are different from them. The preferences for syndication partners, however, have different implications for the portfolio companies and the venture capital firms. Companies funded by heterogeneous syndicates are less likely to go public or get acquired by other companies. However, venture capital firms that co-invest with more heterogeneous partners are more likely to survive. This paper develops a new method for empirically examining the formation of syndication among multiple firms. It also addresses issues of endogeneity. In the second chapter, we develop an economic framework which articulates the impact of the quality of legal protection offered to investors on the incentives of start-up founders to recruit partners or opt for sole ownership. The theoretical analysis predicts that a positive relationship is likely to exist between the quality of the legal system and ownership concentration of start-ups. This prediction is supported by the data obtained from the Adult Population Survey of the Global Entrepreneurship Monitor project between 2001 and 2004. The third chapter finds that the number of CEOs born in summer is disproportionately small, and firms with summer born CEOs have higher market valuation. Our evidence is consistent with the "relative-age effect" due to school admissions grouping together children with age differences up to one year, with summer-born children disadvantaged throughout life by being younger than non-summer-born classmates. Those younger children.
Download or read book Three Essays on Venture Capital Finance written by Jeffrey Scott Kobayahsi Peter and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Venture capital finances high-risk, high-return projects. In addition to financing, venture capitalists provide advice and expertise in management, commercialization, and development that enhance the value, success, and marketability of projects. Venture capitalists also have skills in selecting projects with potentially high returns. The first chapter investigates the contracting relationship between venture capitalists and entrepreneurs in a setting where the venture capitalist and entrepreneur contribute intangible assets (advice and effort) to a project that are non-contractible and non-verifiable. In general, in the private market equilibrium, advice provided by the venture capitalist and the number of projects funded are lower than the social optimum. Government tax and investment policies may alleviate these market failures. The impact of a capital gains tax, a tax on entrepreneur's revenue, an investment subsidy to venture capitalists, and government run project enhancing programs are evaluated. Finally, we analyze the effects of a government venture capital firm competing with private venture capital. The second chapter focuses on competition in venture capital markets. We model a three-stage game of fund raising, investment in innovative projects and input of advice and effort, where fund raising is used as an entry deterrence mechanism. We examine the impacts of taxes and subsidies on venture capital market structure. We find that a tax on venture capitalist revenue and a tax on entrepreneur revenue increase the likelihood of entry deterrence and reduce the number of projects funded in equilibrium. A subsidy on investment reduces the likelihood of entry deterrence and increases the number of projects funded. The third chapter examines the venture capitalist's choice of investment in project selection skills and investment in managerial advice. We model, separately, a private venture capitalist and a labour-sponsored venture capitalist (LSVCC) with different objectives. A LSVCC is a special type of venture capitalist fund that is sponsored by a labour union. The private venture capitalist maximizes its expected profits, while the LSVCC maximizes a weighted function of expected profits and returns to labour. Consistent with empirical evidence, the quality of projects, determined by project selection skills and managerial advice, is higher for the private venture capitalist.
Download or read book VC written by Tom Nicholas and published by Harvard University Press. This book was released on 2019-06-03 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: From nineteenth-century whaling to a multitude of firms pursuing entrepreneurial finance today, venture finance reflects a deep-seated tradition in the deployment of risk capital in the United States. Tom Nicholas’s history of the venture capital industry offers a roller coaster ride through America’s ongoing pursuit of financial gain.
Download or read book Venture Capital written by Mike Wright and published by Routledge. This book was released on 2022-03-24 with total page 544 pages. Available in PDF, EPUB and Kindle. Book excerpt: The International Library of Management is a comprehensive core reference series comprised of the most significant and influential articles by the leading authorities in the management studies field. The collections of essays is both international and interdisciplinary in scope and provides and entry point for investigating the myriad of study within the discipline.
Download or read book Entrepreneurial Finance written by Luisa Alemany and published by Cambridge University Press. This book was released on 2018 with total page 647 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academics and practitioners from a range of institutions across Europe provide a cutting-edge, practical, and comprehensive review on the financing of entrepreneurial ventures. From sourcing and obtaining funds, to financial tools for growing and managing the financial challenges and opportunities of the startup, Entrepreneurial Finance: The Art and Science of Growing Ventures is an engaging text that will equip entrepreneurs, students and early-stage investors to make sound financial decisions at every stage of a business' life. Largely reflecting European businesses and with a European perspective, the text is grounded in sound theoretical foundations. Case studies and success stories as well as perspectives from the media and from experts provide real-world applications, while a wealth of activities give students abundant opportunities to apply what they have learned. A must-have text for both graduate and undergraduate students in entrepreneurship, finance and management programs, as well as aspiring entrepreneurs in any field.
Download or read book Essays in Venture Capital and Entrepreneurship written by Jochen Christian Werth and published by . This book was released on 2014 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Equity Crowdfunding written by Kazem Mochkabad Khoramchahi and published by Springer Nature. This book was released on 2020-09-18 with total page 193 pages. Available in PDF, EPUB and Kindle. Book excerpt: Because of the subprime mortgage crisis in 2008, the challenges of securing necessary external capital have become more significant for young ventures. In this realm, equity crowdfunding has evolved into the most promising financing alternative for entrepreneurs and received worldwide attention. By focusing on three subsequent research questions, this book aims to contribute to the ongoing scientific discussion of equity crowdfunding. First, it reveals fruitful future research avenues by providing a systematic overview of the development of equity crowdfunding research. Second, it sheds light on the so far less explored investor perspective and analyzes the decision-making process of equity crowdfunding investors. Third, based on a multi-method approach, the questions of how equity crowdfunding investors evaluate radically innovative ventures and how radically innovative ventures can establish venture legitimacy are explored.
Download or read book Why Startups Fail written by Tom Eisenmann and published by Currency. This book was released on 2021-03-30 with total page 370 pages. Available in PDF, EPUB and Kindle. Book excerpt: If you want your startup to succeed, you need to understand why startups fail. “Whether you’re a first-time founder or looking to bring innovation into a corporate environment, Why Startups Fail is essential reading.”—Eric Ries, founder and CEO, LTSE, and New York Times bestselling author of The Lean Startup and The Startup Way Why do startups fail? That question caught Harvard Business School professor Tom Eisenmann by surprise when he realized he couldn’t answer it. So he launched a multiyear research project to find out. In Why Startups Fail, Eisenmann reveals his findings: six distinct patterns that account for the vast majority of startup failures. • Bad Bedfellows. Startup success is thought to rest largely on the founder’s talents and instincts. But the wrong team, investors, or partners can sink a venture just as quickly. • False Starts. In following the oft-cited advice to “fail fast” and to “launch before you’re ready,” founders risk wasting time and capital on the wrong solutions. • False Promises. Success with early adopters can be misleading and give founders unwarranted confidence to expand. • Speed Traps. Despite the pressure to “get big fast,” hypergrowth can spell disaster for even the most promising ventures. • Help Wanted. Rapidly scaling startups need lots of capital and talent, but they can make mistakes that leave them suddenly in short supply of both. • Cascading Miracles. Silicon Valley exhorts entrepreneurs to dream big. But the bigger the vision, the more things that can go wrong. Drawing on fascinating stories of ventures that failed to fulfill their early promise—from a home-furnishings retailer to a concierge dog-walking service, from a dating app to the inventor of a sophisticated social robot, from a fashion brand to a startup deploying a vast network of charging stations for electric vehicles—Eisenmann offers frameworks for detecting when a venture is vulnerable to these patterns, along with a wealth of strategies and tactics for avoiding them. A must-read for founders at any stage of their entrepreneurial journey, Why Startups Fail is not merely a guide to preventing failure but also a roadmap charting the path to startup success.
Download or read book Doing Capitalism in the Innovation Economy written by William H. Janeway and published by Cambridge University Press. This book was released on 2012-10-08 with total page 345 pages. Available in PDF, EPUB and Kindle. Book excerpt: A unique insight into the interaction between the state, financiers and entrepreneurs in the modern innovation economy.
Download or read book Essays in Innovation and Entrepreneurship written by Daria Anosova and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, I study sources of innovation and the choices established firms, researchers/entrepreneurs, and venture capitalist make when pursuing innovation. There are three main sources of innovation. First, an innovation can be produced by researchers working inside a large firm. Second, it can result from a collaboration among established firms, researchers, and entrepreneurial start-ups. Finally, an innovation can be created by a start-up. In the latter case, the successful start-up can be either acquired by an established firm or continue to be a stand-alone company. In most cases such a start-up needs to raise outside funding, which is often provided by a venture capital fund. Chapter 1 considers the choices firms and researchers/entrepreneurs make when deciding to pursue innovation together. In this chapter I use an incomplete contracting framework to model the choice between three innovation strategies: an acquisition, an employment contract, and an alliance. Each of these options comes with different contracting frictions that lead to distortions in the agents' innovation effort levels. The agents choose the innovation strategy that maximizes their joint surplus by minimizing the effect of these distortions. In particular, the agents are trading off the hold-up costs characterizing acquisitions, wage restrictions in employment contracts, and possible IP rights conflicts in alliances. My theoretical model generates predictions about the organizational structures used to innovate, and can explain (1) why talent acquisitions were popular among tech companies in 2010--14, (2) why large pharmaceutical companies switched from conducting research internally to pursuing acquisitions, alliances, and licensing agreements, and (3) why some companies engage in alliances, while others don't. Chapter 2 considers start-ups and their origins. I find that people who work in VC-backed start-ups are more likely to become founders of VC-backed start-ups than employees of public companies or private companies not financed by venture capital. I also show that founders come from more successful VC-backed companies. Finally, workers leave their current employment to start new companies: after an IPO or after a failure of a VC-backed company to raise another round of funding. Chapter 3 considers one of the important decisions made by venture capitalists and other partnerships. In this chapter I model the choice of the optimal number of partners. As more partners join, the profits of the partnership grow due to synergy. However, each partner's share of the profits shrinks leading to moral hazard. In addition, as the founder needs to find more partners, it becomes harder to find good candidates and the type of the marginal partner decreases. The model suggests that higher benefits from starting a fund, faster decreasing type of a marginal partner and higher type of the founder can potentially explain why VC funds are smaller than professional service firms.
Download or read book Essays in Entrepreneurial Finance and Strategy written by Sharat Raghavan and published by . This book was released on 2012 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation analyzes contracts and organizational form decisions in the empirical setting of venture capital investments. The first chapter asks how entrepreneurs and venture capital investors are affected by a specific design feature of investment contracts. Participating preferred rights, which are venture capital contract terms that give investors returns greater than their intrinsic ownership, are used extensively despite possible deleterious effects on founder incentives. Using a novel data set of venture capital investment contracts from 2004-2009, I ask three fundamental questions about these rights: when are they used, who uses them, and what are their consequences? The findings indicate that (i) lower inflows of venture capital funding increase the use of participating preferred rights; (ii) less experienced investors and certain industry sectors utilize participating preferred rights more often; and (iii) firms with participating preferred rights are less likely to raise a subsequent financing at a higher valuation and less likely to exit through an IPO or acquisition, suggesting that the incentive implications of these rights may affect firm performance. These results are robust to specifications that attempt to control for the endogeneity of the contract right. The findings provide important insights for entrepreneurs and investors who are weighing the consequences of certain contractual forms. The second chapter broadens the analysis to other contractual rights to asks how investors and entrepreneurs allocate ownership and venture capital investment rights in competitive markets. Using the same data set of venture capital financings from 2004-2009, I find that changes in market competition, or venture capital supply, affect contractual terms in significant ways. Competition not only affects firm valuations, but how actual firm ownership is divided between entrepreneurs and investors. Additionally, certain contractual rights shift in response to venture capital scarcity. Specifically, the results suggest that (i) entrepreneurs own more of the firm in periods of high venture capital inflows, (ii) entrepreneurs give up cash flow rights in periods of low venture capital inflows, and (iii) the incidence of control rights are not significantly affected by venture capital inflows. Similarly, the results are robust to specifications that attempt to control for the endogeneity of venture capital inflows. The third chapter (co-authored with Eric J. Allen) focuses on a potential inefficiency of organizational design, specifically when a startup chooses to organize as a C-corporation rather than as a limited liability company (LLC). We examine the previously documented anomaly of loss-generating startup firms organizing as C-Corporations, as opposed to the theoretically more tax efficient alternative - the LLC. While prior research examines the potential reasons for this divergence between theory and practice, this is the first study that actually attempts to quantify the foregone tax benefits incurred by the current system. We examine a sample of venture backed firms that reached the Initial Public Offering stage between 1996 and 2008. We find that the vast majority of these firms have accumulated tax losses at issuance, on average $33 million, and that the associated potential tax benefit is significant. We also examine a subsample of firms that were, at one time, organized as pass-through entities prior to going public. We find that, while the majority switched to the C-Corporate form upon the entrance of a venture capital investor, a small number were allowed to retain their pass-through status until issuance. Their existence provides further evidence that the alternative form's lack of adoption must be attributable to some aspect other than technical limitations that would prevent venture capital investment.
Download or read book The Business of Venture Capital written by Mahendra Ramsinghani and published by John Wiley & Sons. This book was released on 2014-08-18 with total page 432 pages. Available in PDF, EPUB and Kindle. Book excerpt: The definitive guide to demystifying the venture capital business The Business of Venture Capital, Second Edition covers the entire spectrum of this field, from raising funds and structuring investments to assessing exit pathways. Written by a practitioner for practitioners, the book provides the necessary breadth and depth, simplifies the jargon, and balances the analytical logic with experiential wisdom. Starting with a Foreword by Mark Heesen, President, National Venture Capital Association (NVCA), this important guide includes insights and perspectives from leading experts. Covers the process of raising the venture fund, including identifying and assessing the Limited Partner universe; fund due-diligence criteria; and fund investment terms in Part One Discusses the investment process, including sourcing investment opportunities; conducting due diligence and negotiating investment terms; adding value as a board member; and exploring exit pathways in Part Two Offers insights, anecdotes, and wisdom from the experiences of best-in-class practitioners Includes interviews conducted by Leading Limited Partners/Fund-of-Funds with Credit Suisse, Top Tier Capital Partners, Grove Street Advisors, Rho Capital, Pension Fund Managers, and Family Office Managers Features the insights of over twenty-five leading venture capital practitioners, frequently featured on Forbes' Midas List of top venture capitalists Those aspiring to raise a fund, pursue a career in venture capital, or simply understand the art of investing can benefit from The Business of Venture Capital, Second Edition. The companion website offers various tools such as GP Fund Due Diligence Checklist, Investment Due Diligence Checklist, and more, as well as external links to industry white papers and other industry guidelines.
Download or read book Handbook of Research on Venture Capital written by Hans Landstr”m and published by Edward Elgar Publishing. This book was released on 2012-01-01 with total page 305 pages. Available in PDF, EPUB and Kindle. Book excerpt: ÔThis exciting second volume of cutting-edge research on venture capital takes up where volume one leaves off, bringing greater depth to topics covered in the first volume (such as angel investing) and adding new topics and insights. It poses interesting questions such as Ð Is venture capital in crisis? Are new models of early investing needed? Ð and offers carefully researched answers. Landstršm and Mason provide insightful commentary and skillfully pinpoint the contributions of a talented set of researchers. Both scholars and practitioners of venture capital will want to read this book.Õ Ð Harry J. Sapienza, University of Minnesota, US ÔThe second edition of the Handbook of Research on Venture Capital provides an important guidepost for venture capital researchers. As Landstršm and Mason point out, the nature of venture capital has changed dramatically over the last ten years. The asset class as a whole has failed to return principal and the old model is under tremendous strain. The contributors nicely highlight many of these changes, especially how venture capital has scaled beyond the US. For those of us active in venture capital research, the chapters raise many interesting research questions that deserve further attention.Õ Ð Andrew Zacharakis, Babson College, US This Handbook charts the development of venture capital research in light of the global financial crisis, starting with an analysis of the current venture capital market and the changing nature of the business angel market. Looking at governance structures, the performance of venture capitalists in terms of investments, economic impact and human capital, and the geographical organization of business angels and venture capital global ÔhotspotsÕ, this book also analyses the current state of venture capital research and offers a roadmap for the future.
Download or read book How Venture Capital Works written by Phillip Ryan and published by The Rosen Publishing Group, Inc. This book was released on 2012-07-01 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explanations to the inner workings of one of the least understood, but arguably most important, areas of business finance is offered to readers in this engaging volume: venture capital. Venture capitalists provide necessary investment to seed (or startup) companies, but the startup is only the beginning, there is much more to be explored. These savvy investors help guide young entrepreneurs, who likely have little experience, to turn their businesses into the Googles, Facebooks, and Groupons of the world. This book explains the often-complex methods venture capitalists use to value companies and to get the most return on their investments, or ROI. This book is a must-have for any reader interested in the business world.
Download or read book Essays on Venture Capital written by Rajarishi Basantraj Nahata and published by . This book was released on 2004 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in Venture Capital Reputation and Learning written by Farzad Pourbabaee and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In chapter 1, I study the experimentation dynamics of a decision maker (DM) in a two-armed bandit setup ([5]), where the agent holds ambiguous beliefs regarding the distribution of the return process of one arm and is certain about the other one. The DM entertains Multiplier preferences a la [27], thus I frame the decision making environment as a two player differential game against nature in continuous time. I characterize the DM's value function and her optimal experimentation strategy that turns out to follow a cut-off rule with respect to her belief process. The belief threshold for exploring the ambiguous arm is found in closed form and is shown to be increasing with respect to the ambiguity aversion index. I then study the effect of provision of an unambiguous information source about the ambiguous arm. Interestingly, I show that the exploration threshold rises unambiguously as a result of this new information source, thereby leading to more conservatism. This analysis also sheds light on the efficient time to reach for an expert opinion. The results of this chapter has been recently published in [61].In chapter 2, I introduce a dynamic model of random search where ex ante heterogeneous venture capitalists (investors) with unknown abilities match with a variety of startups (projects). There is incomplete yet symmetric information about investors' types, whereas the projects' types are publicly observable to all investors. In the unique stationary equilibrium, the matching sets, value functions and steady state distributions are endogenously determined. Interpreting the market posterior belief about the venture capitalists' ability as their reputation, I study the outcomes of the economy when the success or failure of the projects create feedback effects: innovation spillovers and reputational externalities. When there are positive spillovers from successful early stage projects to late stage business opportunities, I show increased levels of search frictions could save the market from breakdown caused by the neglect of spillover effect. When the reputational externality is at play, namely when the deal flow of each investor is inversely impacted by the distribution of other investors' reputation, I show the proportion of the high ability inactive investors is inefficiently high, and the projects suffer from early termination.
Download or read book Essays on Entrepreneurial Finance and Venture Capital written by Sungjoung Kwon and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first essay, I examine what motivates young startup firms to rely on external intellectual property rights. While startups are better suited to exploration than exploitation, I find that approximately 10% of VC-backed companies acquire external patents while still private. They are neither low-quality firms nor firms with low patent output, lending little support to the hypothesis that patent acquisition is a response to low productivity. Rather, patent litigation risk appears to play an important role. Startup firms are significantly more likely to buy external patents when they are sued for patent infringement or exposed to a high threat of litigation. Using a difference-in-differences design around the Supreme Court decision Alice Corp. vs. CLS Bank, I show that firms whose patent litigation risks are reduced the most become significantly less likely to buy patents. Consistent with these findings and with the litigation risk preventing firms from reaching their full potential, firms buying patents are significantly less likely to go public. The second essay (with Michelle Lowry and Yiming Qian) examines mutual fund investments in private firms. Historically, a key advantage of being a public firm was broader access to capital, from a disperse group of shareholders. In recent years, such capital has increasingly become available to private firms as well. We document a dramatic increase over the past twenty years in the number of mutual funds participating in private markets and in the dollar value of these private firm investments. We evaluate several factors that potentially contribute to this trend: firms seeking extra capital to postpone public listing, mutual funds seeking higher risk-adjusted returns and initial public offering (IPO) allocations, and venture capitalists (VCs) seeking new investors to substantiate higher valuations. Results provide the strongest support for the first two factors. The final essay explores potential conflicts of interest in venture capital investments. VC firms occasionally make investments in startups founded by their own employees. The agency hypothesis predicts that this practice is motivated by conflicts of interest-VCs pursue their private benefits by financing themselves or coworkers. Alternatively, the information hypothesis posits that VCs are utilizing their networks-the connection with founders enable VCs to better evaluate the prospects of the venture. Using historical employment data in Crunchbase, I identify connections between entrepreneurs and VC firms. My findings provide strong support for the information hypothesis. Startups raising financing from connected VCs outperform their peers in the long run. VCs exhibit superior investment performance from connected deals, and these deals generate higher demand from other VCs as well. Finally, VCs making investments in connected startups are better able to raise follow-on funds. In sum, my findings suggest that, in the venture capital industry, private benefits from self-dealing is not sufficient enough to outweigh reputation concerns and/or the potential financial compensation from investing in better companies.
