The Experts below are selected from a list of 360 Experts worldwide ranked by ideXlab platform
Josh Lerner - One of the best experts on this subject based on the ideXlab platform.
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Venture Capital s role in financing innovation what we know and how much we still need to learn
Research Papers in Economics, 2020Co-Authors: Josh Lerner, Ramana NandaAbstract:Venture Capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the Venture model. At the same time, Venture Capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional Venture Capital investors; 2) the relatively small number of Venture Capital investors who hold, and shape the direction of, a substantial fraction of Capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by Venture Capital firms. While our ability to assess the social welfare impact of Venture Capital remains nascent, we hope that this article will stimulate discussion of and research into these questions.
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Venture Capital s role in financing innovation what we know and how much we still need to learn
Social Science Research Network, 2020Co-Authors: Josh Lerner, Ramana NandaAbstract:Venture Capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the Venture model. At the same time, Venture Capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional Venture Capital investors; 2) the relatively small number of Venture Capital investors who hold, and shape the direction of, a substantial fraction of Capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by Venture Capital firms. While our ability to assess the social welfare impact of Venture Capital remains nascent, we hope that this article will stimulate discussion of and research into these questions. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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institutions and Venture Capital
Research Papers in Economics, 2013Co-Authors: Josh Lerner, Joacim TagAbstract:We survey the literature on Venture Capital and institutions and present a case study comparing the development of the Venture Capital market in the US to Sweden. Our literature survey underscores that the legal environment, financial market development, the tax system, labor market regulations, and public spending on research and development correlates with Venture Capital activities across countries. Our case study suggests these institutional differences led to the later development of an active Venture Capital market in Sweden compared to the US. In particular, a later development of financial markets and a heavier tax burden for entrepreneurs have played a key role.
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institutions and Venture Capital
Industrial and Corporate Change, 2013Co-Authors: Josh Lerner, Joacim TagAbstract:We survey the literature on Venture Capital and institutions and present a case study comparing the development of the Venture Capital market in the United States and Sweden. Our literature survey underscores that the legal environment, financial market development, the tax system, labor market regulations, and public spending on research and development correlate with Venture Capital activities across countries. Our case study suggests these institutional differences led to the later development of an active Venture Capital market in Sweden compared with the United States. In particular, a later development of financial markets and a heavier tax burden for entrepreneurs have played a key role.
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The future of public efforts to boost entrepreneurship and Venture Capital
Small Business Economics, 2010Co-Authors: Josh LernerAbstract:The promotion of new high-potential business Ventures and Venture Capital is of critical importance to economic growth. Well-considered policies can profoundly influence such opportunities, but many public initiatives are misguided. This article reviews the evidence behind these claims, as well as the criteria that can delineate appropriate and inappropriate policies towards the promotion of Venture Capital and high-potential entrepreneurship.
Paul A Gompers - One of the best experts on this subject based on the ideXlab platform.
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Venture Capital investment cycles the impact of public markets
Journal of Financial Economics, 2008Co-Authors: Josh Lerner, Paul A Gompers, Anna Kovner, David S ScharfsteinAbstract:It is well documented that the Venture Capital industry is highly volatile and that much of this volatility is associated with shifting valuations and activity in public equity markets. This paper examines how changes in public market signals affected Venture Capital investing between 1975 and 1998. We find that Venture Capitalists with the most industry experience increase their investments the most when public market signals become more favorable. Their reaction to an increase is greater than the reaction of Venture Capital organizations with relatively little industry experience and those with considerable experience but in other industries. The increase in investment rates does not affect the success of these transactions adversely to a significant extent. These findings are consistent with the view that Venture Capitalists rationally respond to attractive investment opportunities signaled by public market shifts.
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specialization and success evidence from Venture Capital
Research Papers in Economics, 2007Co-Authors: Paul A Gompers, Anna Kovner, Josh LernerAbstract:This paper examines how organizational structure affects behavior and outcomes, studying the performance of different types of Venture Capital organizations. We find a strong positive relationship between the degree of specialization by individual Venture Capitalists at a firm and its success. When the individual investment professionals are highly specialized themselves, the marginal effect of increasing overall firm specialization is much weaker. The poorer performance by generalists appears to be due to both an inefficient allocation of funding across industries and poor selection of investments within industries. Venture Capital organizations with more experience tend to outperform those with less experience.
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the money of invention how Venture Capital creates new wealth
2001Co-Authors: Paul A Gompers, Josh LernerAbstract:Ninety percent of new entrepreneurial businesses that don't attract Venture Capital fail within three years.
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the Venture Capital revolution
Journal of Economic Perspectives, 2001Co-Authors: Paul A Gompers, Josh LernerAbstract:V T enture Capital has developed as an important intermediary in financial markets, providing Capital to firms that might otherwise have difficulty attracting financing. These firms are typically small and young, plagued by high levels of uncertainty and large differences between what entrepreneurs and investors know. Moreover, these firms typically possess few tangible assets and operate in markets that change very rapidly. Venture Capital organizations finance these high-risk, potentially high-reward projects, purchasing equity or equity-linked stakes while the firms are still privately held. The Venture Capital industry has developed a variety of mechanisms to overcome the problems that emerge at each stage of the investment process. At the same time, the Venture Capital process is also subject to various pathologies from time to time, which can create problems for investors or entrepreneurs. The primary focus of this article is on drawing together the empirical academic research on Venture Capital and highlighting what is still not known. With this focus in mind, four limitations should be acknowledged at the outset. First, this paper will not address the many theoretical papers that examine various aspects of the Venture Capital market, much of it examining the role that Venture Capitalists play in mitigating agency conflicts between entrepreneurial firms and outside investors.' Second, this article does not focus on the intricacies of the
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the Venture Capital cycle
1999Co-Authors: Paul A Gompers, Josh LernerAbstract:The Venture captial industry in the United States has grown dramatically over the last two decades. Annual inflows to Venture funds have expanded from virtually zero in the mid-1970s to more than US$9 billion in 1997. Many of the most visible new firms -including Apple Computer, Genentech, Intel, Lotus, Microsoft and Yahoo - have been backed by Venture Capital funds. Yet despite this tremendous growth and its visible success, Venture Capital remains a mysterious industry. Numerous misconceptions persist about the nature and role of Venture Capitalists. Paul Gompers and Josh Lerner's extensive research on Venture Capital organizations is based largely on original data sets developed through close relationships with institutional investors in Venture Capital funds and investment advisors. "The Venture Capital Cycle" synthesizes their path-breaking work. After an historical overview, the book looks at the formation of funds, the investment of the funds in operating companies and the liquidation of these investments. The concluding chapter provides a road map for future research in this growing area. Three themes run throughout the book. The first is that all Venture Capitalists confront tremendous incentive and information problems. The second is that because the various stages of the Venture Capital processes are related, the entire process is best viewed as a cycle. The third is that, unlike most financial markets, the Venture Capital industry adjusts very slowly to shifts in the supply of Capital and the demand for financing.
Natdanai Aleenajitpong - One of the best experts on this subject based on the ideXlab platform.
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Venture Capital networks in southeast asia network characteristics and cohesive subgroups
International Review of Financial Analysis, 2021Co-Authors: Natdanai Aleenajitpong, Arnat LeemakdejAbstract:Abstract Venture Capital firms (VC) have encountered with uncertainty and risk of asymmetric information due to an investment in early-to-growth stage start-ups with technological base and high growth potential. Venture Capital syndication network helps reduce a broad gap of information asymmetry in a Venture Capital investment. Moreover, network connections are found to be the success factor for Venture Capitalists under a lack of fully developed institutional environment in emerging market. Venture Capital industry in Southeast Asia is nascent yet in demanding and fast growing. Despite a decline in the number of Venture deals in the US, the deals keep surging in Southeast Asia (SEA), one of the most significant and dynamic propellers of the world economy. To develop the entrepreneurial ecosystem in SEA, it is interesting to examine how VC firms are connected to one another. Even though several literatures found some distinctive network characteristics amidst the US, European and Chinese Venture Capital market, the Southeast Asian has left unattended. In this paper, we initiate the network of Venture Capital firms among Southeast Asian nations and explore their relationships through social network analysis. The purposes of this study are to investigate the topological and statistical properties of VC network consisting of small-world behavior, power law distribution, and centrality measure such as degree, closeness, and betweenness. In addition, we classify various levels of connections into subnetworks and examine influential groups of VCs in Southeast Asia. We initiate an empirical study on the characteristics of VC network across different countries in Southeast Asia by using a unique hand-collected dataset of syndicated deals. Social network analysis has initially and preliminarily been applied to the VC network in this region. This paper contributes to VC network literature in providing a unique network structure and network metrics of Venture Capital in SEA. In managerial contribution, this study provides more structural VC cooperation towards VC syndication networks. This benefits to Venture Capital firms who are looking for potential partners in Southeast Asian region and start-up companies who are looking for funding with high-networked or influencial VCs. The results also confirm previous evidence of significance on VC networks in emerging market, even if the institution and regulation are claimed to fall behind that in the developed market. This research introduces the fact that the Venture Capital network in Southeast Asia has small-world pattern and Singapore acts as a hub of Venture Capital market in the region. Top-ranking VC firms have been listed by network centrality across nations, while multi-company syndications are prevailing in Southeast Asia.
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Venture Capital networks in southeast asia network characteristics and cohesive subgroups
Social Science Research Network, 2019Co-Authors: Natdanai AleenajitpongAbstract:Venture Capital firms (VC) have encountered with uncertainty and risk of asymmetric information due to an investment in early-to-growth stage start-ups with technology-based and high growing potential. Venture Capital syndication network helps reduce a broad gap of information asymmetry in a Venture Capital investment. Moreover, network connections are found to be the success factor for Venture Capitalists under a lack of fully-developed institutional environment in emerging market. Venture Capital industry in Southeast Asia is nascent yet in demanding and fast growing. Despite a decline in the number of Venture deals in the US, the deals keep surging in Southeast Asia (SEA), one of the most significant and dynamic propellers of the world economy. To develop the entrepreneurial ecosystem in SEA, it is interesting to examine how VC firms are connected to one another. Even though several literatures found some distinctive network characteristics amidst the US, European and Chinese Venture Capital market, the Southeast Asian has left unattended. In this paper, we initiate the network of Venture Capital firms among Southeast Asian nations and explore its relationship through social network analysis. The purposes of this study are to investigate the topological and statistical properties of VC network consisting of small-world behavior, power law distribution, centrality measure such as degree, closeness, and betweenness. In addition, we diversify different levels of connection into subnetwork and examine the influential groups of VCs in Southeast Asia. We initiate the empirical study on the characteristics of VC network across different countries in Southeast Asia using the unique hand-collected dataset of syndicated deals. Social network analysis has initially and preliminarily been applied to the VC network in this region. This paper contributes to VC network literature in providing a unique network structure and network metrics of Venture Capital in SEA. In managerial contribution, this study provides more structural VC cooperation towards the government and cooperates, who can facilitate more open innovation practices to create a better open environment and innovation ecosystem among accelerators, investors, and startup companies (including SMEs). The results also confirm previous evidence of significance on networks in emerging market that there is a presence of a strong Venture Capital network in this region, even if the institution and regulation are claimed to fall behind that in the developed region. This research introduces the fact that the Venture Capital network in Southeast Asia has small-world pattern and Singapore acts as a hub of Venture Capital market in the region. Topranking VC firms have been listed by network centrality across nations. Multi-company syndication is prevailing in Southeast Asia.
Marco Da Rin - One of the best experts on this subject based on the ideXlab platform.
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the importance of trust for investment evidence from Venture Capital
Review of Financial Studies, 2016Co-Authors: Laura Bottazzi, Marco Da Rin, Thomas HellmannAbstract:We examine the effect of trust in Venture Capital. Our theory predicts a positive relationship of trust with investment, but a negative relationship with success. Using a hand-collected dataset of European Venture Capital deals, we find that the Eurobarometer measure of trust among nations positively predicts Venture Capital firms’ investment decisions, but that it has a negative correlation with successful exits. Our theory also predicts that earlier stage investments require higher trust, that syndication is more valuable in low-trust situations, and that higher trust investors use more contingent contracts. The empirical evidence supports these predictions.
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a survey of Venture Capital research
Handbook of The Economics of Finance, 2011Co-Authors: Marco Da Rin, Thomas Hellmann, Manju PuriAbstract:This survey reviews the growing body of academic work on Venture Capital. It lays out the major data sources used. It examines the work on Venture Capital investments in companies, looking at issues of selection, contracting, post-investment services, and exits. The survey considers recent work on organizational structures of Venture Capital firms, and the relationship between general and limited partners. It discusses the work on the returns to Venture Capital investments. It also examines public policies, and the role of Venture Capital in the economy at large.
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who are the active investors evidence from Venture Capital
Journal of Financial Economics, 2008Co-Authors: Marco Da Rin, Laura Bottazzi, Thomas HellmannAbstract:This paper examines the determinants and consequences of investor activism in Venture Capital. Using a hand-collected sample of European Venture Capital deals, it shows the importance of human Capital. Venture Capital firms with partners that have prior business experience are more active recruiting managers and directors, helping with fundraising, and interacting more frequently with their portfolio companies. Independent Venture Capital firms are also more active than ‘captive’ (bank-, corporate-, or government-owned) firms. After controlling for endogeneity, investor activism is shown to be positively related to the success of portfolio companies.
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public policy and the creation of active Venture Capital markets
Journal of Public Economics, 2006Co-Authors: Marco Da Rin, Giovanna Nicodano, Alessandro SembenelliAbstract:Abstract We assess the effectiveness of different public policy instruments for the creation of active Venture Capital markets. Our methodology focusses on ‘innovation ratios’, defined to be the shares of high-tech, and of early stage, Venture Capital investments. We study a unique panel of data for 14 European countries between 1988 and 2001. We have several novel findings. First, we find no evidence of a shortage of supply of Venture Capital funds in Europe, a result which questions the effectiveness of the most widely used policy for fostering active Venture Capital markets. We also find other policies to be effective. In particular, the opening of stock markets targeted at entrepreneurial companies has a positive, large effect on the innovation ratios. Reductions in the corporate Capital gains tax rate increase the share of both high-tech and early stage investment. A reduction in labor regulation also results in a higher share of high-tech investments. Finally, we find no evidence of an effect of increased public R&D spending on the innovation ratios.
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public policy and the creation of active Venture Capital markets
Other publications TiSEM, 2006Co-Authors: Marco Da Rin, Giovanna Nicodano, Alessandro SembenelliAbstract:We study how public policy can contribute to increase the share of early stage and high-tech Venture Capital investments, thus helping the development of active Venture Capital markets. A simple extension of the seminal model by Holmstrom and Tirole (1997) provides a theoretical base for our analysis. We then explore a unique panel of data for 14 European countries between 1988 and 2001. We have several novel findings. First, the opening of stock markets targeted at entrepreneurial companies positively affects the shares of early stage and high-tech Venture Capital investments; reductions in Capital gains tax rates have a similar, albeit weaker, effect. Second, a reduction in labor regulation creases the share of high-tech investments. Finally, we find no evidence of a shortage of supply of Venture Capital funds, and no evidence of an effect of increased public R&D spending on the share of high-tech or early stage Venture Capital investments. JEL Classification: G10, G24, H20, O30
Mike Wright - One of the best experts on this subject based on the ideXlab platform.
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university spin out companies and Venture Capital
Research Policy, 2006Co-Authors: Mike Wright, Andy Lockett, Bart Clarysse, Martin BinksAbstract:Abstract The creation of university spin-out companies that create wealth is a major policy objective of governments and universities. Finance is a catalyst of this wealth creation yet access to Venture Capital is a major impediment faced by these companies. In this article we adopt a finance pecking order perspective to examine the problems faced by those university spin-out companies seeking to access Venture Capital. We triangulate evidence from spin-out companies, university technology transfer offices and Venture Capital firms in the UK and Continental Europe to identify the problems and to suggest policy developments for these parties as well as government. We compare perceptions of high-tech Venture Capital firms that invest in spin-outs with those that do not, and also consider VCs’ views on spin-outs versus other high-tech firms. Our evidence identifies a mismatch between the demand and supply side of the market. In line with the pecking order theory, Venture Capitalists prefer to invest after the seed stage. However, in contrast to the pecking order theory, TTOs see Venture Capital as more important than internal funds early on. We develop policy implications for universities, technology transfer offices, academic entrepreneurs, Venture Capital firms and government and suggest areas for further research.
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university spin out companies and Venture Capital
Research Policy, 2006Co-Authors: Mike Wright, Andy Lockett, Bart Clarysse, Martin BinksAbstract:University spin-out companies face major impediment ofaccess to Venture Capital. Using a finance pecking order perspective, thisstudy examines the problems that university spin-out (USO) companies face whenseeking Venture Capital. Focus is on USOs that are expected to have growthprospects but may face difficulty obtaining financing and resources. A gap has long been recognized between the demand for finance byentrepreneurs and the availability of supply. Triangulating between evidencefrom spin-out companies, university technology transfer offices, and VentureCapital firms in the United Kingdom and Europe, problems are identified andpolicy developments are suggested. After a theory is introduced to analyze the equity gap and to examine policyinstruments that have been developed to solve the gap, the article describesdifferent forms of internal funding, debt financing, and equity support.Research draws on survey and interviews of universities technology transferofficers, Venture Capitalists, and academic entrepreneurs in the UnitedKingdomand Europe in 2003-2004. Explored are three questions: (1) What problems are faced by USOs inattracting Venture Capital? (2) What procedures are used by Venture Capitalistsin assessing and screening of USOs for investment, and what alternatives exist?and (3) What policies can be adopted to enable USOs to attract Venture Capital.Perceptions of high-tech Venture Capital firms investing in spin-outs arecompared with those that do not. Also considered are Venture Capitalist viewson spin-outs against other high-tech firms. The study finds a mismatch between the demands and supply side of themarket. Also found is that technology transfer officers and USOs see VentureCapital as more important than internal funds early in the process. However,Venture Capitalists prefer to invest after the seed stage. At both seed and start-up stage, USO proposals had a better chance offunding than non-USO high-tech investments. Policy implications are offered foruniversities, technology transfer offices, academic entrepreneurs, VentureCapital firms, and government. (TNM)
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Venture Capital and private equity a review and synthesis
Journal of Business Finance & Accounting, 1998Co-Authors: Mike WrightAbstract:This paper reviews the existing literature on Venture Capital and private equity. The paper emphasises the importance of examining Venture Capital in the light of recent developments in corporate finance and its distinctiveness from other forms of finance. In order to understand current developments, the paper adopts a framework which combines industry/market and firm levels of analysis. Existing literature is reviewed using this framework. Industry level issues relate to rivalry between firms, the power of suppliers and customers, and the threats from new entrants and substitutes. Firm level issues concern deal generation, initial and second screening, valuation and due diligence, deal approval and structuring, post-contractual monitoring, investment realisation, and entrepreneurs' exit and recontracting with Venture Capitalists. This is followed by a review of the evidence on the performance of Venture Capital firms. The paper suggests potentially fruitful areas for further research including the extension of analysis to cover all stages of Venture Capital investment, examination of the inter-linkages between industry and firm level issues and between stages in the Venture Capital process, as well as further analysis of deal structuring issues and investment realisation and recontracting. Copyright Blackwell Publishers Ltd 1998.
