Matt Rhodes Kropf from Harvard Business School will be presenting, “Cost of Experimentation and the Evolution of Venture Capital.” As usual, we will be meeting in Cheit 330 at 12:10 on Wednesday. The abstract for the paper is below:
We study adaptation by financial intermediaries as a response to technological change in the context venture-capital finance. Using a theoretical model and rich data, we are able to both document and provide a framework to understand the changes in the investment strategy of VCs in recent years – an increased prevalence of investors who “spray and pray” – providing a little funding and limited governance to an increased number of startups that they are more likely to abandon, but where early experiments signif-icantly inform beliefs about the future potential of the venture. We also highlight how this adaptation by financial intermediaries has altered the trajectory of aggregate innovation away from complex technologies where initial experiments cost more towards those where information on future prospects is revealed quickly and cheaply.
In this week’s reading section, we will be discussing Shai Bernstein’s work on Innovation and IPOs. He will be visiting us in person.
Last week Vasant Dhar from New York University provided a framework that modeled the risk of giving up important decisions to algorithms.