More from these Authors

• Working Paper | 2019

  Keeping the Little Guy Down: A Debt Trap for Lending with Limited Pledgeability

  Ernest Liu and Benjamin N. Roth

  Microcredit and other forms of small-scale finance have failed to catalyze entrepreneurship in developing countries. In these credit markets, borrowers and lenders often bargain over not only the division of surplus but also contractual flexibility. We show these lending relationships may lead to endogenous poverty traps for poor borrowers if future income is not pledgeable, yet richer borrowers unambiguously benefit. Improving the bargaining position of rich borrowers can harm poor borrowers, as the lender tightens restrictions and prevents them from growing. The theory rationalizes the low average impact and low demand of microfinance despite its high impact on larger businesses.

  Keywords: Entrepreneurship; Developing Countries and Economies; Microfinance; Problems and Challenges;

  Citation:

  Liu, Ernest, and Benjamin N. Roth. "Keeping the Little Guy Down: A Debt Trap for Lending with Limited Pledgeability." Working Paper, March 2019.  View Details

  CiteView Details Read Now

  Related

• Case | HBS Case Collection | October 2019 (Revised October 2019)

  NewView Capital and Venture Capital Secondaries

  Shai Benjamin Bernstein, Ramana Nanda and Allison Ciechanover

  While still a general partner at Silicon Valley-based New Enterprise Associates (NEA), Ravi Viswanathan considered the challenges presented by evolving market dynamics in the venture capital space. Startups were staying private longer, which led to limited partners thirsty for liquidity and venture capital funds managing overloaded portfolios. Viswanathan and the senior leaders of NEA orchestrated the purchase of 31 NEA unrealized portfolio companies by the newly created $1.35 billion NewView Capital spinout that he would head. This secondary transaction provided liquidity to NEA’s limited partners and reallocated NEA partners’ time to shepherd other portfolio companies, while at the same time allowing NewView Capital to reap gains from future exits from a portfolio of diverse, high-quality growth stage technology companies. Now, as he prepares to raise Fund II, Viswanathan acknowledges that the unique circumstances that enabled the launch of Fund I would not be replicable, and he must consider alternative strategies to pursue next. Should he continue to focus on secondary transactions, focus on direct investments, or some combination of the two?

  Keywords: Venture Capital; Capital Markets; Private Equity; Strategy;

  Citation:

  Bernstein, Shai Benjamin, Ramana Nanda, and Allison Ciechanover. "NewView Capital and Venture Capital Secondaries." Harvard Business School Case 820-038, October 2019. (Revised October 2019.)  View Details

  CiteView DetailsEducators

  Related

• Chapter | The Oxford Handbook of Entrepreneurship and Collaboration | 2019

  Coordination Frictions in Venture Capital Syndicates

  Ramana Nanda and Matthew Rhodes-Kropf

  An extensive literature on venture capital has studied asymmetric information and agency problems between investors and entrepreneurs, examining how separating entrepreneurs from the investor can create frictions that might inhibit the funding of good projects. It has largely abstracted away from the fact that a startup typically does not have just one investor but rather several VCs that come together in a syndicate to finance a venture. In this chapter, we therefore argue for an expansion of the standard perspective to also include frictions within VC syndicates. Put differently, what are the frictions that arise from the fact that there is not just one investor for each venture but several investors with different incentives, objectives, and cash flow rights who nevertheless need to collaborate to help make the venture a success? We outline the ways in which these coordination frictions manifest themselves, describe the underlying drivers, and document several contractual solutions used by VCs to mitigate their effects. We believe that this broader perspective provides several promising avenues for future research.

  Keywords: Syndication; frictions; Venture Capital; Networks; Entrepreneurship;

  Citation:

  Nanda, Ramana, and Matthew Rhodes-Kropf. "Coordination Frictions in Venture Capital Syndicates." In The Oxford Handbook of Entrepreneurship and Collaboration, edited by Jeffrey J. Reuer, Sharon Matusik, and Jessica F. Jones. New York: Oxford University Press, 2019.  View Details

  CiteView DetailsFind at HarvardPurchase

  Related