Working Papers
Working Papers
Venture Capitalists vs. Deep-Pocketed Incumbents: Startup Financing Strategies in the Presence of Competitive Threats
with Peter Pham and Jason Zein
Revise and Resubmit, Review of Finance (Special Issue on Finance and Product Markets)
Presentations: EFA (2022), CICF (2022), SFS Cavalcade Asia-Pacific (2022), WEFI (2022), FMA (2022), FIRN (2022), FMA Asia Pacific (2022), FMCG (2022)
We examine how venture capitalists (VCs) adapt their financing strategies to support startups competing against deep-pocketed incumbents. Employing textual analysis to identify a startup's potential competitors, we show that when the competitors are cash-rich, VCs make their financing less conditional by providing more funding each round and evaluating the startup less on short-term performance. This approach requires VCs to rely more on continuous monitoring and liquidation protection, and is restricted to large funds and those with specialized experience. Our results suggest that, as large firms have gained greater financial power, VCs serve as a counter-balancing force to sustain business dynamism.
Presentations: SFS Cavalcade North America (2025), AFA (2025), Columbia Private Equity Research (2025), ABFER (2025), ACFOW (2024), FOM Dartmouth College (2024), EUROFIDAI-ESSEC Paris December Finance Meeting (2024), UNSW
Science-based R&D can deter venture capitalists due to high technical uncertainty. We study whether mission-oriented public funding, which supplies basic science as a public good, fosters VC investments. Our quasi-natural experiment is the BRAIN Initiative (BI), a government-funded program with the goal of mapping the human brain. Using a large language model, we first show the large spillover effects of BI in neurotech. In a difference-in-differences analysis, we find an increase in VC investments in neurotech startups accompanied by higher valuations and more successful VC exits following the BI. The channels driving these results suggest reduced technical uncertainty: 1) increased supply of high-skilled academic labor; 2) more innovation, including breakthrough patents; 3) enhanced integration with complementary technologies, especially AI and big data, which aligns with the BI's data-driven mission. Our results suggest the supply of government-backed science and scientists can spur follow-on private investments in emerging technologies.
Human Capital Structure in VC Partnerships
(Draft Available Upon Request)
Presentations: FMA (2024)
Performance Measurement of Venture Capital Funds (with David Robinson and Per Strömberg)
Political Connections and Incumbent’s Restrictive Innovation