How do geographic and historical-cultural factors shape new business formation? Using novel data on new business registrations, we document that 75% of the variation in new business formation is explained by time-invariant county-level factors and examine the extent to which such variation is driven by historical, cultural, and geographic factors. Current-day new business formation is positively related to historical attributes that presage individualist culture: frontier experience and historical birthplace diversity, as well as the county’s topographical features. The relation holds when we exploit plausibly exogenous variation in frontier experience driven by shocks to the settlement process that arise from historical immigration flows. Our study points to the fundamental role of geographic and historical-cultural features, especially rugged individualism, in explaining contemporary new business formation in the U.S.

This paper studies how demand for labor reacts to financial technology (fintech) shocks based on comprehensive databases of fintech patents and firm job postings in the U.S. during the past decade. We first develop a measure of fintech exposure at the occupation level by intersecting the textual information in job task descriptions and fintech patents. We then document a significant decline of job postings in the most exposed occupations, and an increase in industry as well as geographical concentration of these occupations. Firms resort to an upskilling strategy in face of the fintech disruption, requiring “combo” (finance and software) skills, higher education attainments, and longer work experiences in the hiring of fintech-exposed jobs. Financial firms and those with high innovation outputs are able to offset the disruptive effect from the fintech shock. Among innovating firms, however, only inventors (but not acquisition-driven innovators) experience growth in hiring, sales, investment, and enjoy better returns on assets.

This paper studies how entrepreneurs form new beliefs after making forecast errors. I use survey-based micro data that are representative of the population of French entrepreneurs, and I find that 21% of entrepreneurs make optimistic errors, while 36% make pessimistic errors, suggesting that a minority of entrepreneurs are initially well-calibrated. Although optimism and pessimism are persistent types over time, I show that the likelihood of making errors declines within individuals over time. After overestimating their development and hiring prospects, optimistic entrepreneurs revise their beliefs downward, whereas pessimistic entrepreneurs, who underestimate their prospects, revise upward. The evidence is consistent with entrepreneurs who learn from their past errors. In addition, the ability to correctly forecast sales and employment and revising beliefs are correlated with better performance and growth, and even more so for entrepreneurs who started with pessimistic beliefs.

Going public by merging with a Special Purpose Acquisition Company (SPAC) is much more expensive than conducting a traditional IPO. We rationalize why some companies merge with a SPAC by listing the potential benefits. We analyze the agency problems that certain SPAC features address. SPAC IPO investors and deal sponsors have earned remarkably high annualized average returns, although we warn that recent deals are likely to disappoint. Public investors in the merged companies have earned very low market-adjusted returns on an equally weighted basis, although high redemptions on the worst deals have limited the amount of money that they lost.

The treatment of foreign investors is a contentious topic in U.S. entrepreneurship policy. We model a setting where foreign corporate investments in Silicon Valley may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to knowledge spillovers. 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 foreign corporate investors in U.S. startups, we find evidence consistent with the presence of knowledge spillovers to foreign investors.

We provide the first analysis of the risk exposure and risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a dataset of impact fund cash flows and exploit distortions in VC performance measures to characterize risk profiles. Impact funds have a lower market β than comparable private market strategies. Accounting for β, impact funds underperform the public market, though not more so than comparable strategies. We consider alternative pricing models, accounting for sustainability and emerging markets risk. We show investors’ wealth portfolios and taste change the perceived financial merit of impact investing.

This paper develops the first option pricing model of venture capital-backed companies and their security values that incorporates the dilutive future financing rounds prevalent in the industry. Applying our model to 19,000 companies raising 37,000 rounds shows that preferred contractual features make the most recently issued preferred shares worth on average 56% more than common shares. While future rounds have a negligible impact on most securities, they significantly impair the value of securities with high liquidation multiples or seniority. Counterintuitively, future “investor-friendly” rounds transfer value from current investors to founders and other common shareholders, significantly reducing the value of many preferred protections. Our model-implied valuations predict exit values, price changes, and outcomes. Modeled security values are consistent with prices reported by specialized intermediaries but suggest dramatic underreporting of common share values for tax purposes.

Motivated by new stylized facts from Form D financings, we develop a simple framework in which security choice in early firm financing depends on the entrepreneurial talent contri- bution to firm value relative to capital, which investors may perceive with bias. Observed outcomes are not subject to such bias. Consistent with our model, female-led firms are more likely to use debt funding in early stages and exit at least as successfully as firms without a female founder, with a greater proportion of IPO exits. Female-led firms also have larger boards of directors at the initial stages, indicative of greater monitoring. The early differences in financing and monitoring subside in later rounds, suggesting that bias declines as information is produced. We argue that investors tend to under (over) estimate the human (physical) capital contribution to total firm value in female-led startups, offering new insight into the gender financing gap.