Skin in the Game: An Analysis of Venture Capital Investment in Dermatology from 2002 to 2021

Innovation in Health Care: Time for a Gut Check

Although the Health Information Technology for Economic and Clinical Health (HITECH) Act has accelerated electronic health record (EHR) adoption since its passage, clinician satisfaction with EHRs remains low, and the association of HITECH with health care information technology (IT) entrepreneurship has remained largely unstudied. To determine whether the passage of the HITECH Act was associated with an increase in key measures of health care IT entrepreneurship. This economic evaluation of venture capital (VC) activity in the US from 2000 to 2019 examined funding trends in health care IT, EHR-related companies, and all VC investments before and after the passage of HITECH. A difference-in-differences analysis compared investments in health care IT companies with those of companies in 3 categories: general health care (non-IT), IT (non-health care), and all US VC transactions. Data were analyzed from September 2018 to August 2019. Venture capital funding received by US companies before and after the HITECH Act. Venture capital investment in health care IT companies and the proportion of those investments going to seed-stage companies, a proxy for very early-stage entrepreneurship and innovation. The data included 70 982 investments, of which 9425 (13.3%) were seed stage, 10 706 (15.1%) were early stage, and 50 851 (71.6%) were growth stage. After passage of the HITECH Act, investment in both health care IT companies and EHR-related companies increased at a rate much faster (13.0% and 11.4%, respectively) than VC as a whole (6.9%). In addition, the proportion of investments going to seed-stage health care IT companies increased compared with both overall VC investments and non-IT health care investments. Health care IT companies saw increased probabilities of transactions being seed-stage of 5.1% (SE, 2.2%; 95% CI, 0.8% to 9.3%; P = .02) compared with the entire sample of VC transactions and 13.6% (SE, 1.9%; 95% CI, 9.9% to 17.2%; P < .001) compared with non-IT health care VC transactions. Health care IT had essentially 0 increased probability of a transaction being seed stage compared with IT companies outside health care (-0.8% probability; SE, 2.4%; 95% CI, -5.4% to 3.9%; P = .75). Although widespread clinician dissatisfaction with EHR systems remains a challenge, the HITECH Act's incentive program may have catalyzed early-stage entrepreneurship in health care IT, suggesting an important role for incentives in promoting innovation.

This article describes the impact of economic and financial crises on the investment behavior and cash flow allocation of leveraged buyout (LBO) and venture capital (VC) funds. It complements prior research on the performance of private equity investments throughout the financial crisis. The authors base their empirical analysis on 10,073 LBO and VC deals from 1999 until 2018, provided by Thomson Reuters Eikon, and analyze the resilience of investments in various industries regarding volatility, maximum drawdowns, and investment returns. The empirical results show that LBO and VC funds withdrew their capital from the most volatile industry sectors during both the dot-com crisis (2000–2002) and the financial crisis (2007–2008). The data analysis confirms that these funds reduced their overall exposure to the markets during crises by holding back capital and allocating their money to less- volatile and more-crisis-resilient industries, such as energy and power. These findings extend crisis-related research by explaining how LBO and VC funds’ dynamic investment behavior during crises can positively affect investment performance. <b>TOPICS:</b>Private equity, financial crises and financial market history, performance measurement <b>Key Findings</b> ▪ The article shows that fund managers in LBO and VC funds allocate their investors’ capital into counter-cyclical and crisis-proof sectors and withdraw money from volatile sectors during an economic crisis. ▪ The findings demonstrate that this active change in the fund managers’ investment behavior during the crises may explain why LBO and VC funds can outperform comparable public equity indices. ▪ The article further shows that the allocation of capital in LBO and VC funds during crises is comparable to investors’ allocation behavior in the public equity markets, which is especially important considering the outperformance of PE and VC funds over public equity measured by the public market equivalent.

- In this paper we study the effect of venture capital (VC) financing on firms' investments in a longitudinal sample of 374 Italian unlisted new-technology-based firms (NTBFs) observed over the 10-year period from 1994 to 2003. In particular, we consider the influence of VC on both firms' investment levels and the sensitivity of investments to firms' cash flows. We also distinguish the effects of VC financing according to the type of investor: financial VC (FVC) investors and corporate VC (CVC) investors. We show that the investment rate of Italian NTBFs is strongly and positively correlated with their current cash flows. We also find that after receiving VC financing, NTBFs increase their investment rate independently of the type of VC investor. Even though, on average, VC financing seems not to affect the sensitivity of investments to cash flows, we have found that there is substantial heterogeneity according to the type of VC investor. In fact, CVC-backed firms still exhibit positive investment-cash flow sensitivity. Conversely, when firms receive VC financing from an FVC investor, the sensitivity of investments to cash flows disappears. Therefore, while this study clearly indicates that VC financing is beneficial to NTBFs, it also suggests that managers of NTBFs looking for external financing should be aware that the nature of these benefits depends crucially on the type of investor. . Keywords: investment, new technology-based firm, pecking order, venture capital, corporate venture capital Parole chiave: investimenti, imprese ad alta tecnologia, pecking order, venture capital, corporate venture capital . Jel Classification: G32 - D92 - G23

Purpose– This paper aims to explore the challenges the Venture Capital (VC) funds industry in New Zealand (NZ) faces when sourcing new capital. In NZ, there is a significant gap currently for companies seeking VC funding of between $2 and $10 million to commercialise new products and ideas. Also, the estimated financing needs of the next generation of early stage NZ enterprises are around $2 billion of investment over the next 10 years (NZVIF, 2011).Design/methodology/approach– A qualitative research design is applied, given the exploratory nature of this research. In this study, 15 face-to-face semi-structured interviews with VC fund managers, investors and intermediaries were undertaken.Findings– The findings suggest that the lack of observable proven historical returns from NZ domiciled VC funds is a significant impediment to raising new equity capital. Fund managers and intermediaries also note that there is a lack of domestic entities in NZ that have the capacity and current appetite to invest in VC. In part, this may indicate that VC investors are unwilling to invest further capital in NZ VC funds until the current funds realise their existing investments.Originality/value– Overall our findings support recent initiatives by the NZ VC funds industry to track and monitor the performance of NZ VC funds.

Publicly traded venture capital funds: implications for institutional “fund of funds” investors

The United States Leads the Globe in Venture Capital Funding for Orthopaedic Surgery

The Crowdfunding Effects on Venture Capital Investments

Kill Zones? Measuring the Impact of Big Tech Start-up Acquisitions on Venture Capital Activity

Venture capital and private equity funds are important parts of a financial system as they secure capital to companies without funds which would enable them to form optimal financial arrangements with other financial intermediaries. This paper studies those factors influencing development and further investment into venture capital funds in the Republic of Croatia. The paper will also explain the importance of supporting investment in venture capital and the way such investments influence gross domestic product development, examine the relationship between the taxation and legal system with investment trends into venture capital funds. The results will test the hypothesis that the extent of venture capital fund investments, within an unfavorable tax-legal environment, is highly determined by the rules to which pension funds need to adhere regarding the investment of their own capital into these projects.

Introduction The ability of national economies to create, implement, and successfully domesticate cutting-edge scientific-technological solutions, make effective and intensive use of human (including intellectual) capital, and come up with funding commensurate with need is what determines, in large part, their competitive potential and strategic positions in external and internal markets (Nonaka and Takeuchi, 1995; Quinn 1992; Birkinshaw, Hamel and Mol, 2008; Dzhukha et al., 2017; Cipovova and Dlaskova, 2016). This issue is topical not only for more economically developed countries whose economies may already now be regarded as post-industrial but also for countries with transitive economies, i.e. those transiting from industrialization to post-industrialization. What is crucial to the intensive and science-driven development of the global economy is that innovation systems formed at national levels must be in a fit state. The rationale behind this tenet is that the shift from a stochastic to an institutionalized innovation environment requires significant funding (above all, from sources other than the state's operating budget) if the nation is to implement a series of major investment-infrastructural projects. Yet, at the same time it is worth understanding that business entities operating presently within the real sector of the economy are substantially limited in the ability to self-finance their innovation activity, which is quite capital intensive. That being said, the use of traditional tools utilized in commercial banking and the financial market (loans, debt instruments, etc.) does not bring in much funding for them to invest in long-term projects (Pfirrmann, Wupperfeld and Lerner, 2012; Kormishkin et al., 2016; Vovchenko et al., 2017; Theriou, 2015; Thalassinos et al., 2015; Thalassinos and Kiriazidis, 2003; Thalassinos, 2008). This is due to the fact that under present conditions of financial-economic instability credit risk, as well as the risk of a business failing to meet other financial obligations, is quite high. This aspect is compounded by the fact that the innovation activity of business entities operating within the real sector of the economy is not only capital intensive but quite risky as well. A special role here is played by venture capital financing, a special form of syndicated (collective) investing in innovations that presupposes setting up special venture capital funds that act as an intermediary between venture capital investors and the senior management of the business entity engaged in innovation activity. Since the venture capital fund is an intermediary that institutionalizes venture capital financing, economic gains from innovation projects (investment venture capital profit) go to the business entity (termed a 'venture capital firm') and also to the venture capital investor. The venture capital investor may be a private (natural) person or a large financial, industrial, commercial-and-intermediary, insurance, or service corporation (i.e., legal persons). Furthermore, quite often venture capital firms are set up in the form of joint stock companies (corporate establishments). The venture capital fund, representing the interests of its investors, gets an ownership share in the capital of venture capital firms, and in some cases this share may account for up to 50-75% of the cost of the venture capital firm, but in practice the venture capital fund normally receives a blocking stake in the venture capital firm (25% + 1 share). Consequently, by reducing its participation share in the capital of the venture capital firm the venture capital fund does not take on any obligations respecting the management of the business, which makes it possible to keep risk levels down (Dudin, Lyasnikov, Kuznetsov and Fedorova, 2013; Vanacker, Heughebaert and Manigart, 2014; Novokreshchenova et al., 2016; Fetai, 2015; Boldeanu and Tache, 2016; Akopova and Przhedetskaya, 2016). Of no less importance is the motivation component of venture capital business, consisting in the following: in the event the founder (founders) of a venture capital firm does (do) not hold a majority stake in the investment, they may engage in corporate opportunism, reducing the level of their interest in the outcomes of the firm's activity, or pursue additional gains on the side--via, say, disclosing confidential information to the firm's competitors or other potential investors (Bigus, 2006). …

On the upside or flipside: Where is venture capital positioned in the era of digital disruptions?

This paper presents the results of a study on the impact of EU structural funds on the development of a self-sustainable venture capital (VC) market in Latvia from the perspective of VC fund managers. The study had two objectives. The first was to assess the contribution of European Union (EU) structural funds (SF) programmes toward the development of a self-sustainable VC industry in Latvia. The second was to identify ways by which the structural fund support could be better exploited for the development of the VC industry in Latvia. During three SF planning periods, the stated primary goal of the programmes to support high-growth SMEs was attained—to date, 294 VC investments have been made by publicly supported hybrid VC funds. During the 2004–2006 planning period, the first generation of professional VC fund managers in Latvia emerged in response to the opportunity to manage publicly supported hybrid VC funds. During the subsequent programmes, a high continuation rate by the established managers was observed. Nevertheless, Latvian VC fund managers are not yet capable of raising private funds and still encounter difficulties in attracting the necessary level of private capital for the publicly supported hybrid VC funds. The novelty of the study is the finding that improvements in the SF programme designs did not significantly decrease the impact of factors identified as limiting the success of the operations of VC managers. This suggests and confirms conclusions of other studies that argue that public policies aimed at creating healthy and supporting conditions for VC activity are necessary in addition to public financial support for VC funds. Regarding the next planning period, the suggestion regarding programme design is to continue with already started improvements: increasing the volume of funds, widening the geographic area eligible for investments, reducing restrictions on the types of financial instruments that may be used, lowering the administrative burden for VC fund managers and avoiding micromanagement of VC funds by governmental agency. The observation that the influence of investments in VC funds on the governmental agency’s responsible for VC investments financial statements may be partly responsible for the tendency to micromanage VC funds could be useful not only in Latvia but also in other countries.

The Relation of Venture Capital Investments with Performance Outcome and Market Valuation in the Technology-Based Industry: Evidence from Taiwan

Venture Capital and Clean Technology Investment and Innovation