CleanWater, Inc.: Running Dry & Out of Time

Ramana  Nanda; Robert F. White; Shai  Bernstein; James  Barnett

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Case | HBS Case Collection | November 2018 (Revised June 2019)

CleanWater, Inc.: Running Dry & Out of Time

by Ramana Nanda, Robert F. White, Shai Bernstein and James Barnett

Language: English

Format: Print

14 pages

Educators Purchase

Citation:

Nanda, Ramana, Robert F. White, Shai Bernstein, and James Barnett. "CleanWater, Inc.: Running Dry & Out of Time." Harvard Business School Case 819-016, November 2018. (Revised June 2019.)

About the Authors

Ramana Nanda

Sarofim-Rock Professor of Business Administration (Leave of Absence)

Entrepreneurial Management

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Robert F. White

MBA Class of 1957 Senior Lecturer of Business Administration

Entrepreneurial Management

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More from these Authors

Article | Journal of Financial Economics | July 2020

The Persistent Effect of Initial Success: Evidence from Venture Capital

Ramana Nanda, Sampsa Samila and Olav Sorenson

We use investment-level data to study performance persistence in venture capital (VC). Consistent with prior studies, we find that each additional IPO among a VC firm's first ten investments predicts as much as an 8% higher IPO rate on its subsequent investments, though this effect erodes with time. In exploring its sources, we document several additional facts: successful outcomes stem in large part from investing in the right places at the right times; VC firms do not persist in their ability to choose the right places and times to invest; but early success does lead to investing in later rounds and in larger syndicates. This pattern of results seems most consistent with the idea that initial success improves access to deal flow and that preferential access raises the quality of subsequent investments, perpetuating performance differences in initial investments.

Keywords: Performance; Monitoring; selection; Status; Venture Capital; Performance Consistency; Investment;

Citation:
Nanda, Ramana, Sampsa Samila, and Olav Sorenson. "The Persistent Effect of Initial Success: Evidence from Venture Capital." Journal of Financial Economics 137, no. 1 (July 2020): 231–248. View Details

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Working Paper | HBS Working Paper Series | 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: venture capital; financing; 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." Harvard Business School Working Paper, No. 20-031, June 2020. View Details

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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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CleanWater, Inc.: Running Dry & Out of Time

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