Cost of Experimentation and the Evolution of Venture Capital

Ewens, Michael; Nanda, Ramana; Rhodes‐Kropf, Matthew

doi:10.2139/ssrn.2685208

Cited by 47 publications

(70 citation statements)

References 26 publications

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“…While statistically significant, these estimates for the VC variable have much less economic significance than those in Table 4's models of future employment and employment growth. The asymmetry between the importance of VC equity for success (employment, Table 4) and failure (Table 5) is consistent with VCs investing in a highly skewed portfolio, in which there are (hopefully) a few home runs, and many failures (Ewens et al 2018).…”

Section: Issuer and Founder/ceo Characteristicsmentioning

confidence: 53%

Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

Howell

Niessner

Yermack

2019

The Review of Financial Studies

393

224

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Initial coin offerings (ICOs) have emerged as a new mechanism for entrepreneurial finance, with parallels to initial public offerings, venture capital, and presale crowdfunding. In a sample of more than 1,500 ICOs that collectively raise ${\$}$12.9 billion, we examine which issuer and ICO characteristics predict successful real outcomes (increasing issuer employment and avoiding enterprise failure). Success is associated with disclosure, credible commitment to the project, and quality signals. An instrumental variables analysis finds that ICO token exchange listing causes higher future employment, indicating that access to token liquidity has important real consequences for the enterprise.

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Section: Issuer and Founder/ceo Characteristicsmentioning

confidence: 53%

Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

Howell

Niessner

Yermack

2019

The Review of Financial Studies

393

224

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“…There are reasons to expect the information value of a patent to be different in these two industries . IT startups tend to be founded by younger entrepreneurs (Ewens, Nanda, and Rhodes‐Kropf ()) and their inventions often face substantial demand uncertainty and imitation risk. Thus, a favorable decision on an IT startup's first patent application can provide a particularly valuable early signal about the quality of its technology and its founders, while also allowing the founders to discuss their idea with VCs without fear of expropriation.…”

Section: How Do Patents Facilitate Access To Capital?mentioning

confidence: 99%

What Is a Patent Worth? Evidence from the U.S. Patent “Lottery”

Farre-Mensa¹,

Hegde²,

Ljungqvist

2019

The Journal of Finance

174

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We provide evidence on the value of patents to startups by leveraging the quasi‐random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first‐time applications filed at the U.S. Patent Office since 2001, we find that startups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow‐on innovation. Winning a first patent boosts a startup’s subsequent growth and innovation by facilitating access to funding from venture capitalists, banks, and public investors.

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“…There are reasons to expect the information value of a patent to be different in these two industries (Cohen, Nelson, and Walsh 2000). IT startups tend to be founded by younger entrepreneurs (Ewens, Nanda, and Rhodes-Kropf 2018) and their inventions often face substantial demand uncertainty and imitation risk. Thus, a favorable decision on an IT startup's first patent application can provide a particularly valuable early signal about the quality of its technology and its founders, while also allowing the founders to more freely discuss their idea with VCs without the fear of expropriation.…”

Section: Variation Across Industriesmentioning

confidence: 99%