WEFI
Title: “A Valuation Model of Venture Capital-Backed Companies with Multiple Financing Rounds” 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 …
Continue reading “Will Gornall (University of British Columbia)”
Title: “Mistake-based Discrimination in Early-stage Finance” 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. …
Title: “Innovation under Ambiguity and Risk” We model innovation investments as real options and explore the implications of ambiguity—Knightian uncertainty—and risk for innovation decisions. Our model provides predictions for creating options to invest and options to wait. The ensuing empirical analysis uses a risk measure and a new outcome-independent measure of ambiguity. We find a …
Title: “Patents to Products: Product Innovation and Firm Dynamics” We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms’ market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find …
Title: “Women in Science: Lesson from the Baby Boom” How do children affect women in science? We investigate this question using rich biographical data, linked with patents and publications, for 83,000 American scientists in 1956 at the height of the baby boom. Our analyses reveal a unique life-cycle pattern of productivity for mothers. While other …
Title: “Kill Zone” Venture capitalists suggest that incumbent internet platforms create a kill zone around themselves, where any competing entrant is acquired quickly. Consequently, financing new startups becomes unprofitable. We construct a simple model that rationalizes the existence of a kill zone. The price at which an acquisition is done depends on the number of …
Continue reading “Raghu Rajan (University of Chicago, Booth)”
Title: “Small Business Survival Capabilities and Policy Effectiveness” Using unique City of Oakland data during COVID-19, we document that small business survival capabilities vary by firm size as a function of revenue resiliency, labor flexibility, and committed costs. Nonemployer businesses rely on low cost structures to survive 73% declines in own-store foot traffic. Microbusinesses (1-to-5 …
Title: “AI and High-Skilled Work: Evidence from Analysts” Policymakers fear artificial intelligence (AI) will disrupt labor markets, especially for high-skilled workers. We investigate this concern using novel, task-specific data for security analysts. Exploiting variation in AI’s power across stocks, we show analysts with portfolios that are more exposed to AI are more likely to reallocate …
Title: “Value without Employment” Young firms’ contribution to aggregate employment has been underwhelming. However, a similar trend is not apparent in their contribution to aggregate sales or aggregate stock market capitalization. We study the implications of the arrival of “low marginal – high average” revenue-product-of-labor firms in a stylized model of dynamic firm heterogeneity, and …
Title: “Research Subsidy Spillovers, Two Ways” In this paper, we quantify the magnitude of R&D spillovers created by grants to small firms from the US Department of Energy. Our empirical strategy leverages variation due to state-specific matching policies, and we develop a new approach to measuring both geographic and technological spillovers that does not rely …