Technological Disruptive Potential and the Evolution of IPOs and Sell-Outs

Since the late 1990s, the number of private firms exiting via initial public offerings (IPOs) in U.S. markets has sharply declined. At the same time, the number of exits via acquisitions (i.e., sell-outs) has soared. Successful firms are nowadays more likely to sell-out to other (public or private) companies than…

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Geographic Concentration of Venture Capital Investors, Corporate Monitoring, and Firm Performance

The coordination of venture capital (VC) investors in their syndicate significantly influences their choice of contractual terms and portfolio firm performance. The difficulties in coordination and corporate monitoring incentivize VC investors to choose contractual mechanisms designed to protect them from the downside risks of early-stage entrepreneurial firms. Moreover, their firms…

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Foreign Investors & Domestic Company Growth: Evidence from US Venture Capital Investments in Sweden

There is a long-standing debate about the advantages and disadvantages of foreign investors. Advocates emphasize the benefits of foreign capital, expertise and networks, whereas critics worry about hollowing out domestic economic activities. This debate also pertains to the financing of start-ups by venture capitalists (VCs). The US is the epicentre…

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Contracts with Benefits: The Implementation of Impact Investing

Impact investing has rapidly become a major force in both the public and private financial markets. In just a decade or so, it has grown both on the money-management side and on the entrepreneurial side from a niche to a sector with at least $35 billion in deals in 2018Continue reading ⟶

VCs, Founders, and the Performance Gender Gap

Venture Capital Contracts

A large body of academic work examines the problem of financial contracting, and frequently uses the context of an entrepreneur negotiating a financing deal with an investor. Entrepreneurial firms are key drivers of innovation and employment growth, and the efficient allocation of capital to early stage firms is crucial to…

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Persistent Blessings of Luck: Theory and an Application to Venture Capital

Financial economists have long debated whether or not investment managers differ in the skills they have. While studies of individual stocks, mutual funds, and other fund classes generally find that investors do not consistently outperform passive benchmarks after-fee and out-performance is not persistent, an important exception is the private equity…

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Squaring Venture Capital Valuations with Reality

Historically, most successful venture capital-backed companies went public within three to eight years of their initial venture capital (VC) funding.

More recently, many successful VC-backed companies have opted to remain private for substantial periods and have grown to enormous size without a public offering. Companies such as Uber, Airbnb, and…

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Decreasing Returns or Reversion to the Mean? The Case of Private Equity Fund Growth

This article analyzes the interaction between the growth and the performance of the two most prominent groups of private equity (PE) funds: buyout funds and venture capital (VC) funds.

These funds are usually structured as closed-end, limited-life vehicles. Therefore, in order to keep earning fees, PE firms periodically attempt to…

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Venture Capital Investments and Merger and Acquisition Activity around the World

In this paper, we investigate what happens to venture capital investments when M&A activity is regulated.  The paper studies the interaction between venture capital (VC) activity and M&A activity in 40 different countries around the world.  
 
The initial idea for this paper came from an interesting story…

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The Deregulation of the Private Equity Markets and the Decline in IPOs

Recent years have seen a sharp decline in the number of initial public offerings (IPOs) in the U.S.

While this decline has garnered considerable attention both in academic and policy circles and in the press, its causes remain unclear (Gao, Ritter, and Zhu (2013); Doidge, Karolyi, and Stulz (2013, 2017)).…

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Fostering Entrepreneurship: Promoting Founding or Funding?

Everybody loves Silicon Valley. Imitations can be found worldwide: Silicon Forest (Oregon), Swamp (Florida), Gorge (UK), Glen (Scotland), Fjord (Norway), Wadi (Israel), Savannah (Kenya), and many more. Policy makers, in particular, are eager to foster entrepreneurial ecosystems by promoting entrepreneurship, with the hope to foster economic growth, employment, and innovation.…

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Venturing Beyond the IPO: Financing of Newly Public Firms by Pre-IPO Investors

A wide body of literature emphasizes that venture capitalists (VCs) focus on young private companies, generally in high-tech industries.  However, we find that these investors fund companies after the IPO as well.  In a sample of private firms going public for the first time, 15% of the firms that were…

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The Persistent Effect of Early Success: Evidence from Venture Capital

Unlike other assets classes, private equity -- especially venture capital -- has been found to exhibit performance persistence. Money managers that perform well in one period have a higher likelihood of being above-average in their performance in the future. To understand better what might account for this persistence, we examined…

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The Life Cycle of Corporate Venture Capital

Recent decades have witnessed non-financial firms’ forays into venture capital by creating Corporate Venture Capital (CVC) divisions. That is, these firms create internal CVC divisions to make systematic minority equity investments in innovative startups. As an illustration, consider GM Ventures, the CVC unit initiated by General Motors in 2010. On…

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