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• Working Paper | HBS Working Paper Series | 2020

  Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers

  Ufuk Akcigit, Sina T. Ates, Josh Lerner, Richard Townsend and Yulia Zhestkova

  The treatment of foreign investors has been a contentious topic in U.S. entrepreneurship policy in recent years. This paper examines foreign corporate investments in Silicon Valley from a theoretical and empirical perspective. We model a setting where such funding may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to spillovers to the overseas firm providing the financing and the nation where it is based. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S. government to raise their costs to deter investments. Using as comprehensive as possible a sample of investments by non-U.S. corporate investors in U.S. start-ups between 1976 and 2015, we find evidence consistent with the presence of knowledge spillovers to foreign investors.

  Keywords: innovation; foreign direct investment; Corporate Venture Capital;

  Citation:

  Akcigit, Ufuk, Sina T. Ates, Josh Lerner, Richard Townsend, and Yulia Zhestkova. "Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers." Harvard Business School Working Paper, No. 21-043, September 2020.  View Details

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• Case | HBS Case Collection | April 2020 (Revised August 2020)

  WeWork—November 2018

  Paul A. Gompers, Patrick Sweeney and Alex Gachanja

  In May 2017, SoftBank announced the official launch of the Vision Fund — which promptly became the largest technology-focused investment fund in the world, with nearly $100 billion in capital under its management. Reports from a few months prior hinted that SoftBank was weighing a billion-dollar investment deal with WeWork, a commercial real estate company that specializes in shared office spaces. The official launch of the fund was proceeded by a series of multi-billion dollar investments in WeWork, eventually bringing the company’s post-money valuation to $42 billion. The development of the Vision Fund had key implications for the late-stage venture capital industry. Moreover, Soft Bank’s investments in WeWork raise important questions regarding investment decision-making, asset valuation, and issues surrounding corporate governance.

  Keywords: Entrepreneurship; Venture Capital; Valuation; Corporate Governance;

  Citation:

  Gompers, Paul A., Patrick Sweeney, and Alex Gachanja. "WeWork—November 2018." Harvard Business School Case 220-075, April 2020. (Revised August 2020.)  View Details

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• Article | Journal of Economic Perspectives | Summer 2020

  Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn

  Josh Lerner and Ramana Nanda

  Venture capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the venture model. At the same time, venture capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional venture capital investors; 2) the relatively small number of venture capital investors who hold, and shape the direction of, a substantial fraction of capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by venture capital firms. While our ability to assess the social welfare impact of venture capital remains nascent, we hope that this article will stimulate discussion of and research into these questions.

  Keywords: innovation; financing; Venture Capital; Financing and Loans; Technological Innovation;

  Citation:

  Lerner, Josh, and Ramana Nanda. "Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn." Journal of Economic Perspectives 34, no. 3 (Summer 2020): 237–261.  View Details

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