Collaboration in Entrepreneurial Finance

2019 ◽  
pp. 371-393
Author(s):  
Douglas Cumming ◽  
Sofia Johan ◽  
Yelin Zhang
Keyword(s):  
Private Equity ◽  
Value Added ◽  
Future Research ◽  
Entrepreneurial Finance ◽  
Firm Investment ◽  
Different Types ◽  
Equity Funds ◽  
Technology Parks ◽  
Private Equity Funds ◽  
Different Sources

An important topic in some areas of finance involves syndication, which refers to more than one investor in an investee firm. Investment syndication involves collaboration, particularly where investors are value-added active investors, and there are potential agency problems among syndicated investors. This chapter reviews the literature on collaboration across different sources of entrepreneurial finance. In particular, it considers angel investors, crowdfunding, technology parks, and venture capital and private equity funds. The chapter identifies cases when different types of investors work well together, as well as cases where the evidence indicates collaboration has been less than fruitful. The chapter concluded by identifying avenues for future research.

Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting

2021 ◽  
Author(s):  
Erik Stafford
Keyword(s):  
Private Equity ◽  
Small Firms ◽  
Publicly Traded ◽  
Investment Performance ◽  
Value Investing ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Asset Selection ◽  
Investment Process ◽  
Stock Portfolio

Abstract The contributions of asset selection and incremental leverage to buyout investment performance are more important than typically assumed or estimated to be. Buyout funds select small firms with distinct value characteristics. Public equities with these characteristics have high risk-adjusted returns relative to common factors. Adding incremental leverage to a publicly traded stock portfolio increases both risks and mean returns in this sample. Direct investments in private equity funds earn lower mean returns than a replicating strategy designed to mimic these key economic features of their investment process with public equities and brokerage loans.

scholarly journals Beware of Venturing into Private Equity

2009 ◽  
Vol 23 (1) ◽  
pp. 147-166 ◽  
Author(s):  
Ludovic Phalippou
Keyword(s):  
Private Equity ◽  
Governance Structure ◽  
Agency Conflicts ◽  
Stock Market Index ◽  
Compensation Contracts ◽  
Market Index ◽  
Standard And Poor's ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Public Equity

As a step towards understanding whether a private equity governance structure reduces overall agency conflicts relative to a public equity governance structure (as is often argued), this paper describes the contracts between private equity funds and investors, and the returns earned by investors. The paper sets the stage with a puzzle: the average performance of private equity funds is above that of the Standard and Poor's 500—the main public stock market index—before fees are charged, but below that benchmark after fees are charged. Why are the payments to private equity buyout funds so large? Why does the marginal investor invest in buyout funds? I explore one potential answer (and probably the most controversial): that some investors are fooled. I show that the fee contracts for these funds are opaque. Considering this and the way that compensation contracts bury, in details, costly provisions that are difficult to justify on the basis of proper incentive alignment, it would be premature to assert that the agency conflicts are lower in private equity than in public equity.

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