More from these Authors

• Working Paper | HBS Working Paper Series | 2020

  The Evolution of CEO Compensation in Venture Capital Backed Startups

  Michael Ewens, Ramana Nanda and Christopher Stanton

  We use individual-level data to shed light on the evolution of founder-CEO compensation in venture capital-backed startups. We document that having a tangible, marketable product is a fundamental milestone in CEOs' compensation contracts, marking the point at which liquid cash compensation begins to increase significantly – well before a liquidity event. “Product market fit” also coincides with key human capital in the startup becoming more replaceable, marking an apparent transition in the firm's lifecycle from differentiation to standardization. Although substantial increases in cash compensation for founder-CEOs in response to milestones improves the certainty equivalent of attempting entrepreneurship relative to flat pay, low cash compensation in the very early years can still deter entrepreneurship for potential entrants. We characterize the types of individuals most likely to be impacted by this constraint and hence those whose ideas are unlikely to be commercialized through VC-backed entrepreneurship.

  Keywords: entrepreneurship; venture capital; Executive Compensation;

  Citation:

  Ewens, Michael, Ramana Nanda, and Christopher Stanton. "The Evolution of CEO Compensation in Venture Capital Backed Startups." Harvard Business School Working Paper, No. 20-119, May 2020.  View Details

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• Working Paper | HBS Working Paper Series | 2020

  Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation

  Sabrina T. Howell, Josh Lerner, Ramana Nanda and Richard Townsend

  Although late-stage venture capital (VC) activity did not change dramatically in the first two months after the COVID-19 pandemic reached the U.S., early-stage VC activity declined by 38%. The particular sensitivity of early-stage VC investment to market conditions—which we show to be common across recessions spanning four decades from 1976 to 2017—raises questions about the pro-cyclicality of VC and its implications for innovation, especially in light of the common narrative that VC is relatively insulated from public markets. We find that the implications for innovation are not benign: innovation conducted by VC-backed firms in recessions is less highly cited, less original, less general, and less closely related to fundamental science. These effects are more pronounced for startups financed by early-stage venture funds. Given the important role that VC plays in financing breakthrough innovations in the economy, our findings have implications for the broader discussion on the nature of innovation across business cycles.

  Keywords: venture capital; innovation; patents; business cycles; recessions;

  Citation:

  Howell, Sabrina T., Josh Lerner, Ramana Nanda, and Richard Townsend. "Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation." Harvard Business School Working Paper, No. 20-115, May 2020.  View Details

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• Case | HBS Case Collection | August 2019 (Revised April 2020)

  Transforming Hindustan Unilever

  Krishna G. Palepu and Rachna Tahilyani

  In October 2013, when Sanjiv Mehta had taken over the reins of Unilever’s business in India and the larger South Asia region, Hindustan Unilever (HUL) had been going through a difficult time. Caught in the midst of a weakening economy, falling consumer spending, and increasing competition, growth at the firm had slowed. HUL was underperforming not only the market index but also the FMCG index. At the same time, HUL was struggling with many internal woes, ranging from slow market responsiveness to a higher cost structure. The next quarter had not brought any relief. With the external situation worsening, Mehta wondered what changes he needed to make to ensure consistent, competitive, and profitable growth at HUL. The case is accompanied by a video in which the CEO outlines his thinking and the choices he made. The video can be used in class as the class discussion unfolds to bring closure to the discussion and to brief the class on what actions were taken.

  Keywords: Change Management; Transformation; Leading Change; Performance Improvement; Consumer Products Industry; India;

  Citation:

  Palepu, Krishna G., and Rachna Tahilyani. "Transforming Hindustan Unilever." Harvard Business School Case 120-022, August 2019. (Revised April 2020.)  View Details

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