Accomplice: Scaling Early Stage Finance

Ramana  Nanda; Raffaella  Sadun; Olivia  Hull

Case | HBS Case Collection | October 2018

Accomplice: Scaling Early Stage Finance

by Ramana Nanda, Raffaella Sadun and Olivia Hull

Abstract

Accomplice, an early-stage venture capital firm based in Boston, is raising its second fund in November 2017. Since 2009, the firm has followed a seed-led investment model, investing in tech companies at the earliest stages, often when products and business models are still experimental. The firm’s partners are pleased with their preliminary returns and the deal flow they’ve been able to cultivate, in part by empowering local entrepreneurs to invest in promising new ideas on their behalf. The partners are confident their long-term returns will validate their investment strategy and positioning in the increasingly competitive VC market. Will investors agree?

Keywords: venture capital; Early Stage Finance; Seed Finance; Scouts; Business Startups; Private Equity; Investment Portfolio; Organizational Structure; Organizational Change and Adaptation; Partners and Partnerships; Networks; Adaptation; Corporate Strategy; Technology; Financial Services Industry; Massachusetts; Boston; Cambridge; United States;

Language: English

Format: Print

25 pages

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Citation:

Nanda, Ramana, Raffaella Sadun, and Olivia Hull. "Accomplice: Scaling Early Stage Finance." Harvard Business School Case 719-403, October 2018.

By December 2018, entrepreneur Joe DeLoss’s fried chicken company, Hot Chicken Takeover, has opened three restaurants in Columbus, Ohio using an unconventional employment model that helps people with criminal records get back on their feet. DeLoss is proud of the supportive employment environment he has cultivated, but wonders how to scale it beyond Columbus.

Exploiting random assignment of judges to panels at Harvard Business School’s New Venture Competition (NVC) between 2000 and 2015, we find that exposure to more venture capitalist (VC) judges increases male participants’ chances of starting a VC-backed startup after HBS much more than this exposure increases female participants’ chances. A survey suggests this is in part because male participants more often proactively reach out to VC judges after the NVC. Our results suggest that networking frictions are an important reason men benefit more than women from exposure to VCs. Such frictions can help explain part of the gender gap in entrepreneurship and also have implications for how to design networking opportunities to facilitate financing of the best (rather than just the best networked) ideas.

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Accomplice: Scaling Early Stage Finance

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