Case | HBS Case Collection | July 2014

Venture Capital at the Harvard Management Company in Historical Perspective

by Felda Hardymon, Tom Nicholas and Vasiliki Fouka

Abstract

The compromise between capital preservation and growth has always been central to the performance of the Harvard endowment. Setting an institutional structure for effectively governing this compromise became especially important when the Harvard Management Company began operating in July of 1974. HMC's investments in venture capital, which began within a decade, created tensions around risk-return tradeoffs. HMC grappled with issues surrounding short-term versus long-term investment payoffs, the proportion of the portfolio that should be allocated to venture capital and the most appropriate investment form—direct investing in entrepreneurial startups, later stage businesses, or outsourcing this function and investing in funds. Such decisions would matter from the perspective of generations of students and faculty who depended on HMC maximizing returns and getting the balance of the Harvard portfolio right.

Keywords: Venture Capital; Financial Management; Asset Management; Higher Education; Investment; Financial Services Industry; Education Industry; Cambridge;

Citation:

Hardymon, Felda, Tom Nicholas, and Vasiliki Fouka. "Venture Capital at the Harvard Management Company in Historical Perspective." Harvard Business School Case 815-047, July 2014.