We study how technological shocks to the cost of starting new businesses have led the venture capital model to adapt in fundamental ways over the prior decade. We both document and provide a framework to understand the changes in the investment strategy of venture capitalists (VCs) in recent...

This paper investigates whether individual venture capitalists have repeatable investment skill and to what extent their skill is impacted by the VC firm where they work. We examine a unique dataset that tracks the performance of individual venture capitalists' investments across time and as...

The deregulation of securities laws|in particular the National Securities Markets Improvement Act (NSMIA) of 1996|has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of...

We estimate the impact of venture capital (VC) contract terms on startup outcomes and the split of value between the entrepreneur and investor, accounting for endogenous selection via a novel dynamic search and matching model. The estimation uses a new, large data set of first financing rounds...

We document new facts on the evolution of founder-CEO compensation in venture capital-backed startups. Having a tangible product ("product market fit") is a fundamental milestone in CEOs' compensation, marking the point where liquid cash compensation increases significantly -- well before an IPO...

We explore the dynamics of venture capital (VC)-backed startup boards using novel data on director entry, exit, and characteristics. At formation, a typical board is entrepreneur-controlled. Independent directors join the median board after the second financing, when control becomes shared, and...

Existing standards prohibit disclosures of internally created intangible capital to firm balance sheets, resulting in a downward bias of reported assets. To characterize off-balance sheet intangible assets, we use transaction prices to estimate this missing intangible capital. On average, our...

The fundamental uncertainty of new technologies at their earliest stages implies that it is virtually impossible to know the true potential of a venture without learning about its viability through a sequence of investments over time. We show how this process of experimentation can be...

Our paper demonstrates that while failure tolerance by investors may encourage potential entrepreneurs to innovate, financiers with investment strategies that tolerate early failure endogenously choose to fund less radical innovations. Failure tolerance as an equilibrium price that increases in...

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...