This paper examines how government funding programs geared towards early-stage companies interact with private capital markets. Using hand-collected data on 755 government programs worldwide, we find that governments’ allocations to such funding programs have been comparable to global venture capital disbursements in the past decade. Government programs were more frequent in periods with more private venture activity, a relationship that was stronger in nations with better public governance. The programs’ structures often relied on the local private sector. The private sector’s involvement was greater when government programs targeted earlier-stage companies and when rankings of government effectiveness were higher. We find that such government funding programs increased local innovation, particularly when the programs focused on early-stage ventures or collaborated with the private sector. These findings are most consistent with the explanation that the reliance on private capital markets enabled governments to mitigate investment frictions and improve capital allocation.
{"title":"Public Entrepreneurial Finance around the Globe","authors":"J. Bai, Shai Bernstein, Abhish Dev, J. Lerner","doi":"10.2139/ssrn.3834040","DOIUrl":"https://doi.org/10.2139/ssrn.3834040","url":null,"abstract":"This paper examines how government funding programs geared towards early-stage companies interact with private capital markets. Using hand-collected data on 755 government programs worldwide, we find that governments’ allocations to such funding programs have been comparable to global venture capital disbursements in the past decade. Government programs were more frequent in periods with more private venture activity, a relationship that was stronger in nations with better public governance. The programs’ structures often relied on the local private sector. The private sector’s involvement was greater when government programs targeted earlier-stage companies and when rankings of government effectiveness were higher. We find that such government funding programs increased local innovation, particularly when the programs focused on early-stage ventures or collaborated with the private sector. These findings are most consistent with the explanation that the reliance on private capital markets enabled governments to mitigate investment frictions and improve capital allocation.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"23 1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117164144","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop an entrepreneur-focused model for the capital structure of small and entrepreneurial firms. Our model moves from a minimal remuneration that the entrepreneur has to ask because of the risk they incur in the venture and makes two adjustments: first, it takes into consideration entrepreneurs’ overall personal wealth since the grater the personal wealth not invested in the venture the smaller the adverse impact suffered by the entrepreneur; second it includes as wealth invested in the venture the debt collateralized/guaranteed by personal assets (net of any asset that the firm has to repay that loan). Then, we explore how the model adjusts in order to take into consideration the peculiarities of entrepreneurial start-ups, established small entrepreneurial firms and mature and solid ones. Our model suggests that entrepreneurs are more concentrated than usually expected and that equity is not necessarily the most expensive source of finance since debt collateralized/guaranteed by personal assets can be a very expensive source. Our model provides also additional justification for firms to use expensive trade.
{"title":"Equity, Personal Collateral and Capital Structure of the Small Entrepreneurial Firm","authors":"Andrea Moro, Marino Miculan","doi":"10.2139/ssrn.3719684","DOIUrl":"https://doi.org/10.2139/ssrn.3719684","url":null,"abstract":"We develop an entrepreneur-focused model for the capital structure of small and entrepreneurial firms. Our model moves from a minimal remuneration that the entrepreneur has to ask because of the risk they incur in the venture and makes two adjustments: first, it takes into consideration entrepreneurs’ overall personal wealth since the grater the personal wealth not invested in the venture the smaller the adverse impact suffered by the entrepreneur; second it includes as wealth invested in the venture the debt collateralized/guaranteed by personal assets (net of any asset that the firm has to repay that loan). Then, we explore how the model adjusts in order to take into consideration the peculiarities of entrepreneurial start-ups, established small entrepreneurial firms and mature and solid ones. Our model suggests that entrepreneurs are more concentrated than usually expected and that equity is not necessarily the most expensive source of finance since debt collateralized/guaranteed by personal assets can be a very expensive source. Our model provides also additional justification for firms to use expensive trade.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131348563","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Initial Coin Offerings (ICOs) are increasingly discussed as a viable option for start-up companies to raise capital for new projects. In an ICO, a company issues a virtual coin, similar to bitcoin, to raise money. Investors purchase coins in expectation that these coins and their underlying value will rise in the future. Described as a hybrid of an initial public offering (IPO) and a crowdfunding campaign, an ICO poses unique opportunities and risks for both entrepreneurs and investors. Entrepreneurs can attract millions in public investment without the legal and financial restrictions associated with an IPO, and investors can directly finance start-ups and receive a substantial return on their investment. Given the recent emergence of this technology, there is limited empirical research about the ICO landscape. Using data from multiple platforms, this paper provides an overview of the ICO landscape such as the number of ICOs that are KYC-compliant and that exclude residents of the U.S. and China. In addition, the empirical findings suggest that some variables associated with quality, such as the number of bugs in the smart contract, influence ICO success metrics. Furthermore, this paper analyzes the ICO reputation scores across multiple data sources. There is an inconsistent association of reputation with success metrics and a low correlation of ICO reputation across data sources, highlighting the challenges faced by investors in finding reliable information about ICOs. Given this new landscape, this paper provides a number of potential avenues for research into ICOs. In particular, this research underscores the need for reputation systems to facilitate trust, a bedrock of digital economic transactions.
{"title":"Trust is All You Need: An Empirical Exploration of Initial Coin Offerings (ICOs) and ICO Reputation Scores","authors":"L. Rhue","doi":"10.2139/ssrn.3179723","DOIUrl":"https://doi.org/10.2139/ssrn.3179723","url":null,"abstract":"Initial Coin Offerings (ICOs) are increasingly discussed as a viable option for start-up companies to raise capital for new projects. In an ICO, a company issues a virtual coin, similar to bitcoin, to raise money. Investors purchase coins in expectation that these coins and their underlying value will rise in the future. Described as a hybrid of an initial public offering (IPO) and a crowdfunding campaign, an ICO poses unique opportunities and risks for both entrepreneurs and investors. Entrepreneurs can attract millions in public investment without the legal and financial restrictions associated with an IPO, and investors can directly finance start-ups and receive a substantial return on their investment. Given the recent emergence of this technology, there is limited empirical research about the ICO landscape. Using data from multiple platforms, this paper provides an overview of the ICO landscape such as the number of ICOs that are KYC-compliant and that exclude residents of the U.S. and China. In addition, the empirical findings suggest that some variables associated with quality, such as the number of bugs in the smart contract, influence ICO success metrics. Furthermore, this paper analyzes the ICO reputation scores across multiple data sources. There is an inconsistent association of reputation with success metrics and a low correlation of ICO reputation across data sources, highlighting the challenges faced by investors in finding reliable information about ICOs. Given this new landscape, this paper provides a number of potential avenues for research into ICOs. In particular, this research underscores the need for reputation systems to facilitate trust, a bedrock of digital economic transactions.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123934500","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In recent decades, financial markets have undergone many significant transformations. Recently, Initial Coin Offerings (ICOs) emerged as a disruptive trend as part of the broader ecosystem of the so-called Fintech and blockchain. ICOs are a revolutionary tool for capital formation, and are contributing to disintermediate financial markets. After a brief analysis on what ICOs are, how they work and how they evolved, this paper focuses on the first responses implemented by regulatory authorities (in particular securities regulators), highlighting their criticalities and the potential alternatives. This paper is with a view to promoting a more functional approach of the regulatory authorities, which are challenged like never before by the urgency of the regulatory issues emerging from the exponential growth of technology.
{"title":"Initial Coin Offerings. A Primer. The First Response of Regulatory Authorities","authors":"Marco Dell’Erba","doi":"10.2139/ssrn.3063536","DOIUrl":"https://doi.org/10.2139/ssrn.3063536","url":null,"abstract":"In recent decades, financial markets have undergone many significant transformations. Recently, Initial Coin Offerings (ICOs) emerged as a disruptive trend as part of the broader ecosystem of the so-called Fintech and blockchain. ICOs are a revolutionary tool for capital formation, and are contributing to disintermediate financial markets. After a brief analysis on what ICOs are, how they work and how they evolved, this paper focuses on the first responses implemented by regulatory authorities (in particular securities regulators), highlighting their criticalities and the potential alternatives. This paper is with a view to promoting a more functional approach of the regulatory authorities, which are challenged like never before by the urgency of the regulatory issues emerging from the exponential growth of technology.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"208 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-07-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131921472","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We reveal motivations of Chinese firms for issuing Seasoned Equity Offerings (SEO) by examining why firms change the use of SEO proceeds and how they use unspecified SEO proceeds. Using 533 SEOs issued by Chinese firms during 1999-2006, we find that firms do not use unspecified SEO proceeds on capital investment regardless of the nature of controlling shareholders. We find that if the controlling shareholder is the state, then the firm uses unspecified proceeds to stockpile cash; if the controlling shareholder is a parent state-owned enterprise, then the firm uses unspecified proceeds on retiring debt and on related party transactions.
{"title":"Bait and Switch: How Do Chinese Firms Use Proceeds from Seasoned Equity Offerings","authors":"H. Bo, Zhongnan Huang, E. Sterken","doi":"10.2139/ssrn.2562274","DOIUrl":"https://doi.org/10.2139/ssrn.2562274","url":null,"abstract":"We reveal motivations of Chinese firms for issuing Seasoned Equity Offerings (SEO) by examining why firms change the use of SEO proceeds and how they use unspecified SEO proceeds. Using 533 SEOs issued by Chinese firms during 1999-2006, we find that firms do not use unspecified SEO proceeds on capital investment regardless of the nature of controlling shareholders. We find that if the controlling shareholder is the state, then the firm uses unspecified proceeds to stockpile cash; if the controlling shareholder is a parent state-owned enterprise, then the firm uses unspecified proceeds on retiring debt and on related party transactions.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123571232","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This report looks at informal money and venture capital invested in the countries participating in the Global Entrepreneurship Monitor (GEM) in 2009.
本报告着眼于2009年参与全球创业监测(GEM)的国家的非正式资金和风险资本投资情况。
{"title":"Global Entrepreneurship Monitor: Financing Report 2009","authors":"W. Bygrave","doi":"10.2139/ssrn.2418273","DOIUrl":"https://doi.org/10.2139/ssrn.2418273","url":null,"abstract":"This report looks at informal money and venture capital invested in the countries participating in the Global Entrepreneurship Monitor (GEM) in 2009.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114790106","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Drawing on the attention-based view of the firm and the experiential learning literature, this paper develops and tests a theory on how firms learn to cope with the strains of activity load. We first empirically test the impact of activity load on the performance of a focal activity. We then study how this relationship is moderated by four dimensions of experiential learning: stock, homogeneity, pacing, and past success. We test our hypotheses on a proprietary database of 6,913 investments by 248 private equity firms in 77 countries between 1973 and 2008. We find that heavier activity loads exact a smaller toll on performance when firms have larger and more homogeneous stocks of prior experience. However, when firms’ prior experience is more rapidly paced or successful, the toll of heavier activity loads on performance grows. Taken together, these four dimensions of experiential learning provide an initial theoretical basis for the development of a capability that we term attention modulation capability.
{"title":"The Dimensions of Experiential Learning in the Management of Activity Load","authors":"Francesco Castellaneta, M. Zollo","doi":"10.1287/orsc.2014.0906","DOIUrl":"https://doi.org/10.1287/orsc.2014.0906","url":null,"abstract":"Drawing on the attention-based view of the firm and the experiential learning literature, this paper develops and tests a theory on how firms learn to cope with the strains of activity load. We first empirically test the impact of activity load on the performance of a focal activity. We then study how this relationship is moderated by four dimensions of experiential learning: stock, homogeneity, pacing, and past success. We test our hypotheses on a proprietary database of 6,913 investments by 248 private equity firms in 77 countries between 1973 and 2008. We find that heavier activity loads exact a smaller toll on performance when firms have larger and more homogeneous stocks of prior experience. However, when firms’ prior experience is more rapidly paced or successful, the toll of heavier activity loads on performance grows. Taken together, these four dimensions of experiential learning provide an initial theoretical basis for the development of a capability that we term attention modulation capability.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114149918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Nowhere else is operational value creation approach more in need or more in demand than in the Middle East North Africa (MENA) region. Advocating and building operational capabilities requires active investment in business processes, human capital and a long term horizon. By developing capabilities of managers to deliver value from operations will not only result in building great companies, but also raise the bar for human talent and organizational capability in the region. In the long term, such an adrenalin injection of new generation of business leaders could have a profound effect on the regional economy, its competitiveness, and overall integration of MENA private equity markets.
{"title":"Private Equity and Value Creation in Frontier Markets: The Need for an Operational Approach","authors":"S. Mezias, Afzal Amijee","doi":"10.2139/ssrn.2388049","DOIUrl":"https://doi.org/10.2139/ssrn.2388049","url":null,"abstract":"Nowhere else is operational value creation approach more in need or more in demand than in the Middle East North Africa (MENA) region. Advocating and building operational capabilities requires active investment in business processes, human capital and a long term horizon. By developing capabilities of managers to deliver value from operations will not only result in building great companies, but also raise the bar for human talent and organizational capability in the region. In the long term, such an adrenalin injection of new generation of business leaders could have a profound effect on the regional economy, its competitiveness, and overall integration of MENA private equity markets.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"123 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116810288","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper summarizes findings from approximately 150 studies that address characteristics of private equity investments in general, and investments in technology companies in specific. The paper is structured along the private equity investment cycle and follows the successive phases of market screening and investment decision making, operative management of portfolio companies and exiting from investments. In the technology sector in particular, private equity investors have been both praised and criticized for their impact on firm capabilities. Therefore, at some length, the paper summarizes findings in extant literature addressing the impact of private equity investment on target firm’s innovative capabilities, entrepreneurial orientation, productivity, and its ability to make long term investments in intangible assets through R&D as well as in tangible assets through capital expenditures. Where observable, I point out differences among industries as well as differences among the subsequent waves of private equity transactions in the 80s, 90s, and 00s.
{"title":"Private Equity Financing of Technology Firms: A Literature Review","authors":"F. Schock","doi":"10.2139/ssrn.2387359","DOIUrl":"https://doi.org/10.2139/ssrn.2387359","url":null,"abstract":"This paper summarizes findings from approximately 150 studies that address characteristics of private equity investments in general, and investments in technology companies in specific. The paper is structured along the private equity investment cycle and follows the successive phases of market screening and investment decision making, operative management of portfolio companies and exiting from investments. In the technology sector in particular, private equity investors have been both praised and criticized for their impact on firm capabilities. Therefore, at some length, the paper summarizes findings in extant literature addressing the impact of private equity investment on target firm’s innovative capabilities, entrepreneurial orientation, productivity, and its ability to make long term investments in intangible assets through R&D as well as in tangible assets through capital expenditures. Where observable, I point out differences among industries as well as differences among the subsequent waves of private equity transactions in the 80s, 90s, and 00s.","PeriodicalId":322489,"journal":{"name":"ERPN: Other Investors (Sub-Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123046777","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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