The Venture Capital Cycle
- 7h 37m
- Josh Lerner, Paul Gompers
- The MIT Press
- 1999
The venture capital 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 $9 billion in 1997. Many of the most visible forms - including Apple Computer, Genentech, Intel, Lotus, Microsoft, and Yahoo - have been backed by venture capital funds. Yet despite this tremendous growth and its clear 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 advisors. The Venture Capital Cycle synthesizes their pathbreaking work. After a historical overview, the book look 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 if the venture capital processess 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 shift in the supply of capital and the demand for financing.
About the Authors
Paul Gompers is Associate Professor of Business Administration and Josh Lerner is Professor of Business Administration, both with joint appointments in the Finance and Entreneurial Mangement units at Harvard Business School. Both authors are Faculty Research Fellows at the National Bureau of Economic Research.
In this Book
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Introduction
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An Overview of Venture Capital Fundraising
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How Are Venture Partnerships Structured?
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How Are Venture Capitalists Compensated?
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Does the Venture Capital Structure Matter?
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An Overview of Venture Capital Investing
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Why Are Investments Staged?
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How Do Venture Capitalists Oversee Firms?
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Why Do Venture Capitalists Syndicate Investments?
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An Overview of Exiting Venture Capital Investments
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Do Market Conditions Affect the Decision to Go Public?
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Does Reputation Affect the Decision to Go Public?
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Why Do Venture Capitalists Distribute Shares?
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How Well Do Venture-Backed Offerings Perform?
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The Future of the Venture Capital Cycle
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A Note on Data Sources
