Matthew Rhodes-Kropf

Associate Professor of Business Administration

Professor Matthew Rhodes-Kropf is an Associate Professor in the Entrepreneurial Management Unit at Harvard Business School, and a faculty research fellow at the National Bureau of Economic Research. Currently, Professor Rhodes-Kropf teaches courses on Venture Capital and Private Equity in the MBA elective curriculum and in executive education programs.  He was formerly the Daniel W. Stanton Associate Professor of Business at the Columbia University Graduate School of Business, where he received the Dean’s Award for Teaching Excellence.

Professor Rhodes-Kropf specializes in mergers and acquisitions, venture capital, and corporate governance. His work seeks to understand how capital markets interact with the creation of new firms, their financing, growth, governance, and their ultimate exit through a successful IPO or sale or through failure.  He has published in leading finance and economic journals, including The Journal of Finance, Journal of Financial Economics, Review of Financial Studies, The RAND Journal of Economics, and The Journal of Business. His 2004 paper "Market Valuation and Merger Waves," published in The Journal of Finance, was nominated for the Brattle Prize for Best Paper in Corporate Finance in 2005.

Professor Rhodes-Kropf is also an advisor or board member for Ada Investment Management, Correlation Ventures, Xenex, Neighborhood Trust, and Duke University’s Graduate School.

A graduate of Duke University, Professor Rhodes-Kropf holds a BA in computer science and economics and an MA and Ph.D. in economics.

Journal Articles

  1. Is a VC Partnership Greater Than the Sum of Its Partners?

    Matthew Rhodes-Kropf and Michael Ewens

    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 they move between firms. We find evidence of skill and exit style differences even among venture partners investing at the same VC firm at the same time. Furthermore, our estimates suggest the partner's human capital is two to five times more important than the VC firm's organizational capital in explaining performance.

    Citation:

    Rhodes-Kropf, Matthew, and Michael Ewens. "Is a VC Partnership Greater Than the Sum of Its Partners?" Journal of Finance (forthcoming). View Details
  2. Governance and CEO Turnover: Do Something or Do the Right Thing?

    Ray Fisman, Rakesh Khurana, Matthew Rhodes-Kropf and Soojin Yim

    We study how corporate governance affects firm value through the decision of whether to fire or retain the CEO. We present a model in which weak governance—which prevents shareholders from controlling the board—protects inferior CEOs from dismissal, while at the same time insulates the board from pressures by biased or uninformed shareholders. Whether stronger governance improves retain/replace decisions depends on which of these effects dominates. We use our theoretical framework to assess the effect of governance on the quality of firing and hiring decisions using data on the CEO dismissals of large U.S. corporations during 1994–2007. Our findings are most consistent with a beneficent effect of weak governance on CEO dismissal decisions, suggesting that insulation from shareholder pressure may allow for better long-term decision making.

    Keywords: Governing and Advisory Boards; Value; Retention; Resignation and Termination; Corporate Governance; Management Teams; Business and Shareholder Relations;

    Citation:

    Fisman, Ray, Rakesh Khurana, Matthew Rhodes-Kropf, and Soojin Yim. "Governance and CEO Turnover: Do Something or Do the Right Thing?" Management Science 60, no. 2 (February 2014): 319–337. View Details
  3. Entrepreneurship as Experimentation

    William R. Kerr, Ramana Nanda and Matthew Rhodes-Kropf

    Entrepreneurship research is on the rise, but many questions about its fundamental nature still exist. We argue that entrepreneurship is about experimentation: the probabilities of success are low, extremely skewed, and unknowable until an investment is made. At a macro level, experimentation by new firms underlies the Schumpeterian notion of creative destruction. However, at a micro level, investment and continuation decisions are not always made in a competitive Darwinian contest. Instead, a few investors make decisions that are impacted by incentive, agency, and coordination problems, often before a new idea even has a chance to compete in a market. We contend that costs and constraints on the ability to experiment alter the type of organizational form surrounding innovation and influence when innovation is more likely to occur. These factors not only govern how much experimentation is undertaken in the economy, but also the trajectory of experimentation, with potentially very deep economic consequences.

    Keywords: Entrepreneurship; Innovation and Invention;

    Citation:

    Kerr, William R., Ramana Nanda, and Matthew Rhodes-Kropf. "Entrepreneurship as Experimentation." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 25–48. View Details
  4. The Price of Diversifiable Risk in Venture Capital and Private Equity

    Michael Ewens, Charles Jones and Matthew Rhodes-Kropf

    This paper explores the private equity and venture capital (VC) markets and extends the standard principal-agent problem between the investors and venture capitalist to show how it alters the interaction between the venture capitalist and the entrepreneur. Since the investor-VC contract is set before the VC finds any investments, we show that it is the entrepreneur who must compensate the venture capitalist for any extra risk in the project even though it is the investor who requires the VC to hold the risk and even though the entrepreneur holds all of the market power in the model. Furthermore, although perfectly competitive investors expect zero alpha in equilibrium, the nature of the three way interaction results in a correlation between total risk and investor returns even net of fees. Thus, we show how and why diversifiable risk should be priced in VC deals even though investors are fully diversified. We then take our theory to a unique data set and show that while investors do earn zero alpha on average there is a strong correlation between realized risk and investor returns, exactly as predicted by the theory.

    Keywords: Price; Risk and Uncertainty; Venture Capital; Private Equity; Contracts; Investment; Competition; Agency Theory; Investment Return; Forecasting and Prediction; Theory; Diversification;

    Citation:

    Ewens, Michael, Charles Jones, and Matthew Rhodes-Kropf. "The Price of Diversifiable Risk in Venture Capital and Private Equity." Review of Financial Studies 26, no. 8 (August 2013): 1854–1889. View Details
  5. Investment Cycles and Startup Innovation

    Ramana Nanda and Matthew Rhodes-Kropf

    We find that VC-backed firms receiving their initial investment in hot markets are more likely to go bankrupt, but conditional on going public are valued higher on the day of their IPO, have more patents, and have more citations to their patents. Our results suggest that VCs invest in riskier and more innovative startups in hot markets (rather than just worse firms). This is true even for the most experienced VCs. Furthermore, our results suggest that the flood of capital in hot markets also plays a causal role in shifting investments to more novel startups—by lowering the cost of experimentation for early stage investors and allowing them to make riskier, and more novel, investments.

    Keywords: venture capital; innovation; Market Cycles; Financing Risk; Risk and Uncertainty; Venture Capital; Investment; Innovation and Invention;

    Citation:

    Nanda, Ramana, and Matthew Rhodes-Kropf. "Investment Cycles and Startup Innovation." Journal of Financial Economics 110, no. 2 (November 2013): 403–418. View Details
  6. Concentrating on Governance

    Dalida Kadyrzhanova and Matthew Rhodes-Kropf

    This paper develops a novel trade-off view of corporate governance. Using a simple model that integrates agency costs and bargaining benefits of management friendly provisions, we identify the economic determinants of the resulting trade-offs for shareholder value. Consistent with the theory, our empirical analysis shows that provisions that allow managers to delay takeovers have a significant bargaining effect and a positive relation with shareholder value in concentrated industries. By contrast, non-delay provisions have an unambiguously negative relation with value, and more so in concentrated industries. Overall, our analysis suggests that there are governance trade-offs for shareholders, and industry concentration is an important determinant of their severity.

    Keywords: Market Participation; Corporate Governance; Business and Shareholder Relations;

    Citation:

    Kadyrzhanova, Dalida, and Matthew Rhodes-Kropf. "Concentrating on Governance." Journal of Finance 66, no. 5 (October 2011): 1649–1685. View Details
  7. The Market for Mergers and the Boundaries of the Firm

    Matthew Rhodes-Kropf and David Robinson

    We relate the property rights theory of the firm to empirical regularities in the market for mergers and acquisitions. We first show that high market-to-book acquirers typically do not purchase low market-to-book targets. Instead, mergers pair together firms with similar ratios. We then build a continuous-time model of investment and merger activity combining search, scarcity, and asset complementarity to explain this like-buys-like result. We test the model by relating like-buys-like to search frictions. Search frictions and assortative matching vary inversely, supporting the model over standard explanations.

    Keywords: Mergers and Acquisitions; Assets; Investment; Property; Mathematical Methods; Boundaries;

    Citation:

    Rhodes-Kropf, Matthew, and David Robinson. "The Market for Mergers and the Boundaries of the Firm." Journal of Finance 63, no. 3 (June 2008): 1169–1211. View Details
  8. Do Funds-of-Funds Deserve Their Extra Fees?

    Andrew Ang, Matthew Rhodes-Kropf and Rui Zhao

    Since the after-fee returns of funds-of-funds are, on average, lower than hedge fund returns, it is easy to conclude that funds-of-funds do not add value compared to hedge funds. However, funds-of-funds should not be evaluated relative to hedge fund returns in publicly reported databases. Instead, the correct funds-of-funds benchmark is the set of direct hedge fund investments an investor could achieve on her own without recourse to funds-of-funds. We use asset allocation concepts to estimate characteristics of the funds-of-funds benchmark distribution. Since the benchmark characteristics are reasonable, we conclude that funds-of-funds, on average, deserve their fees-of-fees.

    Keywords: Investment Funds; Investment Return; Value; Assets; Resource Allocation;

    Citation:

    Ang, Andrew, Matthew Rhodes-Kropf, and Rui Zhao. "Do Funds-of-Funds Deserve Their Extra Fees?" Journal of Investment Management 6, no. 4 (Fourth Quarter 2008). View Details
  9. The Consequences of Information Revealed in Auctions

    Brett E. Katzman and Matthew Rhodes-Kropf

    This paper considers the ramifications of post-auction competition on bidding behavior under different bid announcement policies. In equilibrium, the auctioneer's announcement policy has two distinct effects. First, announcement entices players to signal information to their post-auction competitors through their bids. Second, announcement can lead to greater bidder participation in certain instances while limiting participation in others. Specifically, the participation effect works against the signalling effect, thus reducing the impact of signalling found in other papers. Revenue, efficiency, and surplus implications of various announcement policies are examined.

    Keywords: Information; Auctions; Bids and Bidding;

    Citation:

    Katzman, Brett E., and Matthew Rhodes-Kropf. "The Consequences of Information Revealed in Auctions." Special Issue on Theoretical, Empirical and Experimental Research on Auctions. Applied Economics Research Bulletin 2 (March 2008): 53–87. View Details
  10. Valuation Waves and Merger Activity: The Empirical Evidence

    Matthew Rhodes-Kropf, David Robinson and S. Viswanathan

    To test recent theories suggesting that valuation errors affect merger activity, we develop a decomposition that breaks the market-to-book ratio (M/B) into three components: the firm-specific pricing deviation from short-run industry pricing; sector-wide, short-run deviations from firms' long-run pricing; and long-run pricing to book. We find strong support for recent theories by Rhodes-Kropf and Viswanathan (forthcoming) and Shleifer and Vishny (2003), which predict that misvaluation drives mergers. So much of the behavior of M/B is driven by firmspecific deviations from short-run industry pricing, that long-run components of M/B run counter to the conventional wisdom: Low long-run value to book firms buy high long-run value-to-book firms. Misvaluation affects who buys whom, as well as method of payment, and combines with neoclassical explanations to explain aggregate merger activity.

    Keywords: Valuation; Mergers and Acquisitions; Forecasting and Prediction; Price; Theory; Behavior;

    Citation:

    Rhodes-Kropf, Matthew, David Robinson, and S. Viswanathan. "Valuation Waves and Merger Activity: The Empirical Evidence." Journal of Financial Economics 77 (2005): 561–603. View Details
  11. Financing Auction Bids

    Matthew Rhodes-Kropf and S. Viswanathan

    In many auctions, bidders do not have enough cash to pay their bid. If bidders have asymmetric cash positions and independent private values then auctions will be inefficient. However, what happens if bidders have access to financial markets? We characterize efficient auctions and show that in an efficient auction the information rent that a bidder earns depends generally on both his valuation and his cash position. In contrast a competitive capital market that is efficient must have information rents that only depend on valuation. This tension between information rents in an efficient auction and zero profits in a competitive equilibrium implies that most often, competitive financing is not efficient.

    Keywords: Financing and Loans; Auctions; Bids and Bidding; Financial Markets; Valuation; Cash; Capital Markets; Profit; Competition;

    Citation:

    Rhodes-Kropf, Matthew, and S. Viswanathan. "Financing Auction Bids." RAND Journal of Economics 36, no. 4 (winter 2005): 789–815. View Details
  12. Price Improvement in Dealership Markets

    Matthew Rhodes-Kropf

    Price improvement refers to the practice whereby dealers order executions that improve on quoted prices. Why are these improvements given? Standard thinking is that competition causes dealers to give better prices to customers with less information. This paper contrasts this with a novel theory in which customers negotiate improvements and differential pricing arises from differences in customers' market power. Each theory impacts the formation of bid/ask spreads in empirically distinguishable ways. Understanding price improvement and its impact on market participants is critical the regulation of markets, particularly since equal execution is such an important stated goal of the SEC.

    Keywords: Price; Markets; Competition; Information; Customers; Negotiation; Mission and Purpose; Practice; Theory; Performance Improvement; Bids and Bidding; Governing Rules, Regulations, and Reforms;

    Citation:

    Rhodes-Kropf, Matthew. "Price Improvement in Dealership Markets." Journal of Business 78, no. 4 (July 2005): 1137–1172. View Details
  13. Market Valuation and Merger Waves

    Matthew Rhodes-Kropf and S. Viswanathan

    Does valuation affect mergers? Data suggest that periods of stock merger activity are correlated with high market valuations. The naïve explanation that overvalued bidders wish to use stock is incomplete because targets should not be eager to accept stock. However, we show that potential market value deviations from fundamental values on both sides of the transaction can rationally lead to a correlation between stock merger activity and market valuation. Merger waves and waves of cash and stock purchases can be rationally driven by periods of over- and undervaluation of the stock market. Thus, valuation fundamentally impacts mergers.

    Keywords: Mergers and Acquisitions; Valuation; Market Transactions; Value; Cash; Stocks; Corporate Social Responsibility and Impact; Bids and Bidding; Market Design; Stock Shares; Accounting Audits; Performance Evaluation;

    Citation:

    Rhodes-Kropf, Matthew, and S. Viswanathan. "Market Valuation and Merger Waves." Journal of Finance 59, no. 6 (December 2004): 2685–2718. View Details
  14. Corporate Reorganizations and Non-Cash Auctions

    Matthew Rhodes-Kropf and S. Viswanathan

    This paper extends the theory of non-cash auctions by considering the revenue and efficiency of using different securities. Research on bankruptcy and privatization suggests using non-cash auctions to increase cash-constrained bidder participation. We examine this proposal and demonstrate that securities may lead to higher revenue. However, bidders pool unless bids include debt, which results in possible repossession by the seller. This suggests all-equity outcomes are unlikely and explains the high debt of reorganized firms. Securities also inefficiently determine bidders' incentive contracts and the firm's capital structure. Therefore, we recommend a new cash auction for an incentive contract.

    Keywords: Auctions; Revenue; Debt Securities; Insolvency and Bankruptcy; Privatization; Capital Structure; Bids and Bidding; Motivation and Incentives; Performance Efficiency; Contracts;

    Citation:

    Rhodes-Kropf, Matthew, and S. Viswanathan. "Corporate Reorganizations and Non-Cash Auctions." Journal of Finance 55, no. 4 (August 2000): 1807–1849. View Details

Working Papers

  1. Corporate Financial Policies in Misvalued Credit Markets

    Jarrad Harford, Marc Martos-Vila and Matthew Rhodes-Kropf

    We theoretically and empirically investigate the repercussions of credit market misvaluation for a firm's borrowing and investment decisions. Using an ex-post measure of the accuracy of credit ratings to capture debt market misvaluation, we find evidence that firms take advantage of inaccuracies by issuing more debt and increasing leverage. The result goes beyond a wealth transfer and has real investment implications: approximately 75% of the debt issuance funds increased capital expenditures and cash acquisitions. In the cross section, misvaluation affects financially constrained firms the most, supporting the theoretical prediction that debt overvaluation loosens financial constraints.

    Citation:

    Harford, Jarrad, Marc Martos-Vila, and Matthew Rhodes-Kropf. "Corporate Financial Policies in Misvalued Credit Markets." Harvard Business School Working Paper, No. 14-097, April 2014. View Details
  2. Innovation and the Financial Guillotine

    Ramana Nanda and Matthew Rhodes-Kropf

    We examine how investors' tolerance for failure impacts the types of projects they are willing to fund. We show that actions that reduce short-term accountability and thus encourage agents to experiment more simultaneously reduce the level of experimentation financial backers are willing to fund. Failure tolerance has an equilibrium price that increases in the level of experimentation. More experimental projects that don't generate enough to pay the price cannot be started. In fact, an endogenous equilibrium can arise in which all competing financiers choose to be failure tolerant in the attempt to attract entrepreneurs, leaving no capital to fund the most radical, experimental projects in the economy. The tradeoff between failure tolerance and a sharp guillotine help explain when and where radical innovation occurs.

    Keywords: innovation; venture capital; Investing; abandonment option; failure tolerance; Venture Capital; Attitudes; Investment; Failure; Innovation and Invention;

    Citation:

    Nanda, Ramana, and Matthew Rhodes-Kropf. "Innovation and the Financial Guillotine." Harvard Business School Working Paper, No. 13-038, October 2012. (Revised November 2012.) View Details
  3. Governing Misvalued Firms

    Dalida Kadyrzhanova and Matthew Rhodes-Kropf

    Equity overvaluation is thought to create the potential for managerial misbehavior, while monitoring and corporate governance curb misbehavior. We combine these two insights from the literatures on misvaluation and governance to ask, when does governance matter? Examining firms with standard long-run measures of corporate governance as they are shocked by plausible misvaluation, we provide consistent evidence that firm performance is impacted by governance when firms become overvalued—overvaluation causes weaker performance in poorly governed firms. Our findings imply that firm oversight is important during market booms, just when stock prices suggest all is well.

    Keywords: Valuation; Performance; Corporate Governance;

    Citation:

    Kadyrzhanova, Dalida, and Matthew Rhodes-Kropf. "Governing Misvalued Firms." Harvard Business School Working Paper, No. 13-037, October 2012. (Revised January 2014. NBER Working Paper Series, No. 19799, January 2014) View Details
  4. Financing Risk and Innovation

    Ramana Nanda and Matthew Rhodes-Kropf

    We provide a model of investment into new ventures that demonstrates why some places, times, and industries should be associated with a greater degree of experimentation by investors. Investors respond to financing risk―a forecast of limited future funding―by modifying their focus to finance less innovative firms. Potential shocks to the supply of capital create the need for increased upfront financing, but this protection lowers the real option value of the new venture. In equilibrium, financing risk disproportionately impacts innovative ventures with the greatest real option value. We propose that extremely novel technologies may need "hot" financial markets to get through the initial period of discovery or diffusion.

    Keywords: Business Startups; Venture Capital; Financial Markets; Financing and Loans; Investment; Price Bubble; Innovation and Invention; Technological Innovation; Risk and Uncertainty;

    Citation:

    Nanda, Ramana, and Matthew Rhodes-Kropf. "Financing Risk and Innovation." Harvard Business School Working Paper, No. 11-013, August 2010. (Revised March 2014.) View Details
  5. Financial vs. Strategic Buyers

    Marc Martos-Vila, Matthew Rhodes-Kropf and Jarrad Harford

    This paper introduces the impact of debt misvaluation on merger and acquisition activity. Debt misvaluation helps explain the shifting dominance of financial acquirers (private equity firms) relative to strategic acquirers (operating companies). The effects of overvalued debt might seem limited since both acquirer types and target firms can access the debt markets. However, fundamental differences in governance and project co-insurance between the two types of acquirer interact with debt misvaluation, resulting in variation in how assets are owned that depends on debt market conditions. We find support for our theory in merger data using a novel measure of debt misvaluation.

    Keywords: Misvaluation; Mergers and Acquisitions; Private Equity;

    Citation:

    Martos-Vila, Marc, Matthew Rhodes-Kropf, and Jarrad Harford. "Financial vs. Strategic Buyers." Harvard Business School Working Paper, No. 12-098, April 2012. (Revised April 2014.) View Details

Cases and Teaching Materials

  1. Texas Teachers and the New Texas Way

    Matthew Rhodes-Kropf, Luis M. Viceira, John Dionne and Nathaniel Burbank

    In 2011 Britt Harris, the Chief Investment Officer for the $107.4 billion Teachers Retirement System of Texas (TRS), was considering whether to pursue strategic partnerships with a group of large private equity firms. After spending four years aggressively moving the fifth largest pension fund in the United States into alternative asset classes, Harris felt that TRS shouldn't just participate in private equity funds as a typical limited partner. Rather, under his proposal TRS would offer carefully vetted firms multi-billion dollar investments through a customized fund structure that had fewer allocation mandates than traditional fund structures, and guarantees to reinvest 50% of any investment gains back into the investment vehicle. In exchange, Harris hoped to receive a highly customized compensation structure and gain greater access to investment professionals within the participating firms.

    Keywords: Texas; TRS; Texas Teachers; Private Equity; Texas;

    Citation:

    Rhodes-Kropf, Matthew, Luis M. Viceira, John Dionne, and Nathaniel Burbank. "Texas Teachers and the New Texas Way." Harvard Business School Case 214-091, April 2014. (Revised June 2014.) View Details
  2. Brazos Partners and the Tri-Northern Exit

    Matthew Rhodes-Kropf and Nathaniel Burbank

    Randall Fojtasek, a partner at the Dallas-based Brazos Private Equity Partners, must decide whether now is the time to sell his firm's investment in Tri-Northern Distribution. Brazos, a middle-market leveraged buyout group, created the company two years earlier through the acquisition of two electronic security distribution companies: Tri-Ed Distribution and Northern Video Systems. Twenty-four months after successfully integrating the two companies, Brazos has received two attractive offers for the combined distributor. With the company's management projecting double-digit growth for 2012, however, it is far from clear that now is the optimal time to exit from the firm's third fund.

    Keywords: Private Equity Exit; LBO; Leveraged Buyout Transaction; Texas; Distribution; Security; Brazos; Tri-Northern; Tri-Ed; Northern Video; private equity; Private Equity; Partners and Partnerships; Distribution; Leveraged Buyouts; Decision Choices and Conditions; Investment Funds; Financial Services Industry; Distribution Industry; Texas;

    Citation:

    Rhodes-Kropf, Matthew, and Nathaniel Burbank. "Brazos Partners and the Tri-Northern Exit." Harvard Business School Case 813-157, March 2013. (Revised March 2014.) View Details
  3. The Canada Pension Plan Investment Board: October 2012

    Josh Lerner, Matthew Rhodes-Kropf and Nathaniel Burbank

    The Canada Pension Plan Investment Board (CPPIB) is one of the largest and fastest-growing pools of investment capital in the world and follows an unusually active program of investment management. In October of 2012, Mark Wiseman was just 12 weeks into his role as chief executive officer, and he must decide how to lead the organization to outperform the market as it grows larger and more geographically dispersed. After seven years of eschewing the use of intermediaries and successfully practicing its "do-it-yourself mega-investing" approach, CPPIB had garnered admiration from institutions on Bay Street and Wall Street alike. It had even been heralded as a "Maple Revolutionary" by The Economist. With assets under management projected to grow to C$275 billion by 2020, however, Wiseman faced the challenge of how to scale the organization's investment strategy for the future. As Wiseman settled into the chief executive's role, would he be able to lead CPPIB to meet its goals?

    Keywords: Canada; CPPIB; Pensions; Private Equity; Financial Services Industry; Canada;

    Citation:

    Lerner, Josh, Matthew Rhodes-Kropf, and Nathaniel Burbank. "The Canada Pension Plan Investment Board: October 2012." Harvard Business School Case 813-103, October 2012. (Revised August 2014.) View Details
  4. VCPE Strategy Vignettes: 2012

    Josh Lerner, Felda Hardymon, Matthew Rhodes-Kropf, Ann Leamon and Lisa Strope

    This compilation of five vignettes depicts common challenges confronting venture capital and leveraged buyout groups. They range from when to deviate from a strategy and how to manage an inept but well-connected executive to equity splits among founders and whether to invest more money in a promising but struggling company. The final vignette summarizes the Simmons Bedding bankruptcy saga.

    Keywords: Strategy;

    Citation:

    Lerner, Josh, Felda Hardymon, Matthew Rhodes-Kropf, Ann Leamon, and Lisa Strope. "VCPE Strategy Vignettes: 2012." Harvard Business School Compilation 812-073, November 2011. View Details
  5. Hardina Smythe and the Healthcare Investment Conundrum

    Matthew Rhodes-Kropf, Ann Leamon and Lisa Strope

    Hardina Smythe, a recent MBA graduate, has just joined a top-tier venture capital firm in the difficult environment of late 2010. Her first assignment is to evaluate three different deals and make recommendations to the partners. Each potential investment has strengths and drawbacks for both the firm and Hardina.

    Keywords: Venture Capital; Asset Management; Private Equity; Entrepreneurship; Investment; Health Care and Treatment; Innovation and Invention; Financial Services Industry;

    Citation:

    Rhodes-Kropf, Matthew, Ann Leamon, and Lisa Strope. "Hardina Smythe and the Healthcare Investment Conundrum." Harvard Business School Case 811-073, February 2011. (Revised June 2011.) View Details
  6. Investcorp and the Moneybookers Bid

    Matthew Rhodes-Kropf and Carin-Isabel Knoop

    In January 2007, Hazem Ben-Gacem, managing director and co-head of Investcorp Technology Partners (ITP), needs to decide what to bid at an auction for Moneybookers Limited, one of the top three e-payment solution providers in Europe. However, approximately 70% of Moneybookers revenues were related to transactions from online gaming sites (down from 100% in 2002). Although the thesis was that e-commerce transactions would soon make up a much larger chunk of the company's revenues, high gaming revenue still raised some questions. Between now and when Ben-Gacem had first submitted a bid of 60 million for Moneybookers back in November 2006, the U.S. Congress had enacted the Unlawful Internet Gambling Enforcement Act putting pressure on e-payment firms with gambling exposure. How would investors in ITP view this transaction? Ben-Gacem also worried about whether Moneybookers could manage the growth of its business and the evolution of regulation around monetary transactions. Moneybookers had effectively become a type of bank with deposit accounts and capital adequacy requirements and all the reporting that went along with it. But could an internet startup maintain the compliance and accounting standards necessary to handle such scrutiny? Could it succeed-and if it did, what would it be worth?

    Keywords: Business Startups; Games, Gaming, and Gambling; Private Equity; Investment; Auctions; Bids and Bidding; Valuation; Europe; United States;

    Citation:

    Rhodes-Kropf, Matthew, and Carin-Isabel Knoop. "Investcorp and the Moneybookers Bid." Harvard Business School Case 811-013, February 2011. (Revised September 2013.) View Details
  7. Iris Running Crane: December 2009

    Matthew Rhodes-Kropf, Josh Lerner and Ann Leamon

    Iris Running Crane, an MBA candidate, must choose among three different job offers in private equity. One is with a top-tier megafund buyout operation; the second with a geographically focused mid-market fund; and the third with a one-time top-tier fund that is trying to reposition itself as a turnaround expert, starting with its own portfolio. Iris must consider the advantages and drawbacks of each position, and how each will help her achieve her personal goals.

    Keywords: Decision Choices and Conditions; Private Equity; Compensation and Benefits; Job Offer; Personal Development and Career; Financial Services Industry;

    Citation:

    Rhodes-Kropf, Matthew, Josh Lerner, and Ann Leamon. "Iris Running Crane: December 2009." Harvard Business School Case 810-073, December 2009. (Revised July 2013.) View Details
  8. VCPE Strategy Vignettes I

    Josh Lerner, G. Felda Hardymon, Matthew Rhodes-Kropf, Ann Leamon and Lisa Strope

    These three vignettes present various issues around the strategy and management of venture capital and private equity firms. In one, the general partners must decide whether to invest in an intriguing opportunity that lies outside the firm's carefully developed investment strategy; in the second, a new associate must decide whether or not to keep a promising but under-performing investment in the portfolio and in the third, a minority investor in a Chinese company considers removing a politically connected but ineffective controller.

    Keywords: Venture Capital; Private Equity; Financial Strategy; Projects; Decision Choices and Conditions; Partners and Partnerships; Opportunities; Investment Portfolio; Business or Company Management; China;

    Citation:

    Lerner, Josh, G. Felda Hardymon, Matthew Rhodes-Kropf, Ann Leamon, and Lisa Strope. "VCPE Strategy Vignettes I." Harvard Business School Compilation 811-043, December 2010. View Details
  9. VCPE Strategy Vignettes II

    Josh Lerner, G. Felda Hardymon, Matthew Rhodes-Kropf, Ann Leamon and Lisa Strope

    These three vignettes present various issues around the strategy and management of venture capital and private equity firms. In one, a senior partner must decide how to manage an over-extended colleague and how to reduce the risk of the firm's portfolio; the second examines the problem of dividing stock among founders and the last summarizes the experience of Simmons Bedding, a US company that declared bankruptcy after 25 years of rotating private equity ownership.

    Keywords: Venture Capital; Private Equity; Cost vs Benefits; Insolvency and Bankruptcy; Investment Portfolio; Ownership; Partners and Partnerships; Risk Management; Stocks; Problems and Challenges; United States;

    Citation:

    Lerner, Josh, G. Felda Hardymon, Matthew Rhodes-Kropf, Ann Leamon, and Lisa Strope. "VCPE Strategy Vignettes II." Harvard Business School Compilation 811-054, December 2010. View Details
  10. Grove Street Advisors: September 2009

    Matthew Rhodes-Kropf and Ann Leamon

    The investment committee of Grove Street Advisors, a pioneer in the provision of customized private equity funds-of-funds for pension fund clients, must decide how to respond to the market opportunities and challenges presented by the turmoil of 2008 and 2009. How can they shift their strategy to fill new market niches, or should they stay with their successful approach thus far, even though the market is getting crowded? The case also presents background about the roles of intermediaries in private equity.

    Keywords: Private Equity; Expansion; Investment Funds; Financial Services Industry;

    Citation:

    Rhodes-Kropf, Matthew, and Ann Leamon. "Grove Street Advisors: September 2009." Harvard Business School Case 810-064, October 2009. (Revised October 2010.) View Details
  11. Avid Radiopharmaceuticals and Lighthouse Capital Partners

    Matthew Rhodes-Kropf and Ann Leamon

    In fall 2008, a venture lender must decide whether to make a loan to Avid, a small but promising venture-backed life sciences firm. In reviewing her proposal, Cristy Barnes considers the company's characteristics and how they differ from a typical investment. At the same time, the CEO and the venture capitalist are exploring the true costs and benefits of taking the loan, particularly in the uncertain economic climate of the time.

    Keywords: Business Startups; Decision Choices and Conditions; Financial Crisis; Venture Capital; Private Equity; Financing and Loans; Investment; Financial Services Industry; Health Industry;

    Citation:

    Rhodes-Kropf, Matthew, and Ann Leamon. "Avid Radiopharmaceuticals and Lighthouse Capital Partners." Harvard Business School Case 810-054, September 2009. (Revised September 2010.) View Details
  12. Milliway Capital & Martin Smith: November 2008

    G. Felda Hardymon, Matthew Rhodes-Kropf and Ann Leamon

    Martin Smith, a recent MBA graduate, has just joined a top-tier venture capital firm in the difficult environment of late 2008. One of his first assignments is to review three companies in a partner's portfolio and recommend strategies for managing them. In addition, the partner also has an opportunity to invest in a long-desired company at a good price. Each company presents different potential risks and rewards, both financial and reputational, for Milliway, the partner, and Martin.

    Keywords: Investment Portfolio; Financial Management; Private Equity; Business Strategy; Partners and Partnerships; Venture Capital; Business or Company Management;

    Citation:

    Hardymon, G. Felda, Matthew Rhodes-Kropf, and Ann Leamon. "Milliway Capital & Martin Smith: November 2008." Harvard Business School Case 810-088, December 2009. View Details
  13. Avid Radiopharmaceuticals: The Venture Debt Question

    Matthew Rhodes-Kropf and Ann Leamon

    The CEO of a promising biotech company must decide how to respond to the macro-economic slump of late 2008. He had planned to pursue an aggressive schedule, moving the firm's Alzheimer's and Parkinson's disease imaging compounds through clinical trials and into the market. This involved expanding the firm's facilities and headcount, and he planned to fund this by taking venture debt. Although clinical trial data is extremely encouraging, questions about raising his next venture round and the overall environment has made him question the wisdom of this plan. This case provides students an opportunity to explore the true cost of venture debt and when it is best used to achieve the goals of all parties—venture capitalists, entrepreneurs, and venture lenders.

    Keywords: Financial Crisis; Entrepreneurship; Borrowing and Debt; Venture Capital; Financial Management; Investment; Health Testing and Trials; Expansion; Biotechnology Industry; Pharmaceutical Industry;

    Citation:

    Rhodes-Kropf, Matthew, and Ann Leamon. "Avid Radiopharmaceuticals: The Venture Debt Question." Harvard Business School Case 809-086, February 2009. View Details