Private Start-ups Research Articles

Impact of COVID-19 Crisis on Healthcare Sector in Bangladesh and Possible Solutions

Like most other countries in the world, the recent COVID-19 outbreak has severely impacted the healthcare sectors in Bangladesh. Despite a very late response to the COVID-19 outbreak, many governments and non-government initiatives have been launched to deal with the crisis in Bangladesh. However, it is evidenced that there is a severe dearth of health personnel, ICU beds, ventilators, PPE, and other required medical equipment for health professionals. The inadequate and ill-timed response from the government has resulted in an increased rate of infection and deaths. Moreover, Non-COVID-19 patients suffer from accessing their regular treatments, primarily due to the lack of safety provided to the health professionals. Therefore, rapid and proactive measurements, digital interventions at a large scale (e.g., use of mHealth and artificial intelligence), decentralization (e.g., equal support and availability of facilities in both rural and urban areas), healthcare budget, multi-party coordination, boosting support for private startups, and increasing testing and treating facilities are highly recommended as possible solutions. Keywords: COVID-19, Pandemic, Healthcare, Bangladesh.

Book Review – Lean Impact: How to Innovate for Radically Greater Social Good Review & Implications for Engaged Programming

The book “Lean Impact: How to Innovate for Radically Greater Social Good” outlines ways to infuse innovation techniques learned from the private start-up sector into sectors traditionally working to make a societal change that may be funded through governmental agencies and grants. These techniques are also applicable to the Land-Grant Cooperative Extension System (CES) through combining them with engaged programming practices and CES best practices and the tools and methods of the Extension Foundation’s Impact Collaborative in urban programs and beyond.

Private Company Valuations by Mutual Funds

AbstractMutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV management. Consistent with (i), families with larger PE holdings and/or stronger information access update valuations more frequently in the absence of public information releases, their updates co-move less with other families, and their fund returns jump less at follow-on financings. We find no support for hypotheses (ii) or (iii). We also find that high-PE-exposure funds are subject to greater financial fragility.

Functional Knowledge versus Strategic Knowledge: What Type of Knowledge Matters Most for the Long-Term Performance of Startups

ABSTRACTPast studies have shown that the flow of knowledge from incumbent firms is associated with the creation of startups and their subsequent performance. While much research has focused on the mechanisms of how incumbent-to-startup knowledge transfer takes place, such as entrepreneurs pursuing opportunities that their previous employers do not want to pursue, we explore with detailed qualitative analysis of six private startups in the Chinese synthetic-dye industry what type of knowledge actually flows and what type is more important for the long-term success of startups. We discover eight types of knowledge that flow from incumbents to new firms during the foundation of startups. Abstracting these eight types of knowledge into two general categories of functional knowledge and strategic knowledge, we find the reception of strategic (not functional) knowledge shapes the long-term competitiveness of surviving startups. Receiving technical knowledge – one type of functional knowledge – during the founding period is necessary for startups’ short-term survival but insufficient for long-term success. Our findings show that the performance implications of initial knowledge flows from incumbents hinge on the type of knowledge, contributing to a more explicit explanation of how incumbent-to-startup knowledge flows affect entrepreneurial performance.

Equity Crowdfunding in the U.S.

We assess the impact of the 2012 JOBS Act equity crowdfunding legislation that allows U.S.non-accredited investors to invest in private small businesses through online portals. The goals of new regulation were to spur small business growth and democratize investment in private startups by increasing access to capital. We find that the evidence is mixed:on the one hand, crowdfunding seems to expand access to finance to small business by targeting firms that are not usually served by institutional investors like angel and venture capital. Furthermore, having a successful crowdfunding campaign has a causal positive effect on future firm performance relative to a failed campaign. On the other hand, the equity crowdfunding market faces severe adverse selection that limit the expansion of this new form of business financing. Moreover, relative to angel-backed firms, successfully crowdfunded firms are less likely to progress through the financing funnel and thus provide exit to investors.

COVID-19 and the Prospects for Telemedicine in India

Restrictions in movements of all nonessential services have been curtailed in India and worldwide owing to the current COVID-19 situation. This potentiates the use of telemedicine to provide healthcare services during the COVID-19 pandemic and lockdown. Telemedicine which was initially primitive and not very well explored is now emerging to be a safe option for healthcare delivery in the interim. Recently, the Ministry of Health and Family Welfare in India has come up with a set of guidelines that eases both the doctors and patients. The clarity in regulations provides a boost to the existing private startups that were operating under a grey area until now and would also attract investors to provide the required push to establish these services in India at a national level. Hence, if accepted as a standard model of healthcare delivery in India, telemedicine will help address the COVID-19 situation as well as provide healthcare access in remote areas. Furthermore, with millions of people already using the “Aarogya Setu” mobile app, it serves as a potential platform to integrate a national telemedicine service.

Terms of Endearment: Financing Terms for Deep Technology Startups on a Crowdfunding Platform

Public science firms generate positive outcomes, but transitions for their private startup counterparts across the so-called ``Valley of Death'' remain challenging. Like other new ventures, they use modern tools to raise capital, such as crowdfunding and simplified convertible debt instruments, but these strategies have been poorly studied for the economically important niche of early-stage science firms. New data from a ``deep technology'' equity crowdfunding (EC) platform show that those investors make different decisions than their offline counterparts. Debt and a related instrument, the Simple Agreement for Future Equity (SAFE), are used successfully in both channels as early-stage vehicles, but selection and funding outcomes differ. Relative to life sciences and data sciences, engineering or hardware firms experience a significant penalty if they elect to offer convertible debt instruments. Equity crowdfunding investors strongly prefer the SAFE to a traditional debt instrument, but are relatively insensitive to the specific terms. These findings impact the understanding of entrepreneurial finance and the policy associated with science-based ventures.

Capital gains taxation and funding for start-ups

We examine how capital gains taxes affect investment in private start-up (i.e., pre-IPO) firms. Using data on capital raised in individual funding rounds, we estimate the effect of the 2010 SBJA, which implemented a full exemption from federal capital gains tax on the sale of qualified shares. Because of the resulting higher expected after-tax returns, we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start-up firms per funding round by about 12%. The effect is stronger in start-up firms that are likely to have greater administrative capacity. We estimate that about one-third of the tax benefit is captured by investors.

The Deregulation of the Private Equity Markets and the Decline in IPOs

AbstractThe deregulation of securities laws—in particular the National Securities Markets Improvement Act (NSMIA) of 1996—has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an initial public offering (IPO) market failure. Rather, founders are using their increased bargaining power vis-à-vis investors to stay private longer.

Risk Capital and Emerging Technologies: Innovation and Investment Patterns Based on Artificial Intelligence Patent Data Analysis

The promise of artificial intelligence (AI) to drive economic growth and improve quality of life has ushered in a new AI arms race. Investments of risk capital fuel this emerging technology. We examine the role that venture capital (VC) and corporate investments of risk capital play in the emergence of AI-related technologies. Drawing upon a dataset of 29,954 U.S. patents from 1970 to 2018, including 1484 U.S. patents granted to 224 VC-backed start-ups, we identify AI-related innovation and investment characteristics. Furthermore, we develop a new measure of knowledge coupling at the firm-level and use this to explore how knowledge coupling influences VC risk capital decisions in emerging AI technologies. Our findings show that knowledge coupling is a better predictor of VC investment in emerging technologies than the breadth of a patent’s technological domains. Furthermore, our results show that there are differences in knowledge coupling between private start-ups and public corporations. These findings enhance our understanding of what types of AI innovations are more likely to be selected by VCs and have important implications for our understanding of how risk capital induces the emergence of new technologies.

A Study on The Influence of Company Characteristics, Market Structure and Start-up Ecosystem on the Motivation and Performance of Global Market Entry of Born-global Start-up

Governments are increasingly turning their eyes towards start-ups for bringing innovation and creating jobs. Many start-ups fail to survive due to their limitations in knowledge, resources and Korean market environment, such as government regulations, limited market size as well as limited investment funds availability. Many start-ups are aiming to go global from the start by developing technologies and products specifically catering to the needs of the global market. In this study, we analyzed the academic and political implications of the factors that have bearings on these born-global startups. Based on previous research, we first established a research model and hypothesis to examine if company characteristics, market structure and start-up ecosystem have any effect on the motivation and performance of start-ups, and further verified it with our data-based analysis and survey results. The research shows that global-mindedness, market size/regulation, and government support impact the motivation for, and the success of global expansion. This highlights the need for deregulation, more government support and a stronger private startup ecosystem.

The Journey of Unicorn Uber from San Francisco to International Disruption

Uber, one of the most valuable and talked about private start-ups of today’s time, took the transportation industry by storm through its technology enabled transportation solutions. This case study explores the journey of Uber from its inception to being one of the most valuable new organizations. It also tries to explore the various issues which the company countered in its journey of expansion and growth.

Ballard narrows focus, cuts costs at Protonex, SOFC tech to Upstart

Canadian-based Ballard Power Systems has implemented several changes at its Protonex subsidiary in Southborough, Massachusetts, including sharpening the focus of its business by divesting certain non-core assets. Protonex's solid oxide fuel cell assets were transferred at the end of 2017 to a private startup company, Upstart Power Inc, for a nominal consideration.

Capital Gains Taxation and Funding for Start-Ups

We examine how capital gains taxes affect investment in private start-up (i.e., pre-IPO) firms. Using data on capital raised in individual funding rounds, we estimate the effect of the 2010 SBJA, which implemented a full exemption from federal capital gains tax on the sale of qualified shares. Because of the resulting higher expected after-tax returns, we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start-up firms per funding round by about 12%. The effect is stronger in start-up firms that are likely to have greater administrative capacity. We estimate that about one third of the tax benefit is captured by investors.

Private Company Valuations by Mutual Funds

Mutual funds value private security holdings at considerably different prices, update evaluations infrequently, and revise valuations dramatically at follow-on funding events. Predictable private valuation changes at follow-on rounds yield predictable fund returns, but effects are muted for large families, families with large investment in the private security, and families with large percentage stakes in funding rounds. Mutual funds with high exposure to private securities have outflows that are more sensitive to poor fund performance when the venture capital market also performs poorly. The results have welfare implications for retail investors interested in accessing private startups via investments in mutual funds.

Private Company Valuations by Mutual Funds

Mutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV management. Consistent with (i), families with larger PE holdings and/or stronger information access update valuations more frequently in the absence of public information releases, their updates co-move less with other families, and their fund returns jump less at follow-on financings. We find no support for hypotheses (ii) or (iii). We also find that high-PE-exposure funds are subject to greater financial fragility.

The Evolution of the Private Equity Market and the Decline in IPOs

The deregulation of securities laws|in particular the National Securities Markets Improvement Act (NSMIA) of 1996|has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an IPO market failure. Rather, founders are using their increased bargaining power vis-a-vis investors to stay private longer.

AMBIDEXTERITY IN STARTUPS: ADDRESSING A RESEARCH GAP

ABSTRACT Scholars are increasingly interested in the firms' dynamic capability of ambidexterity, the organization's ability to be able to exploit (continuous innovation) and explore (discontinuous innovation). However, most of the research on ambidexterity has focused in established, public firms rather than in private startups, which, according to many authors, are responsible for major technological advances and economic growth. This conceptual paper proposes hypotheses for organizational ambidexterity at the startup level predicting ambidexterity from behavioral integration of the startup team, and performance from ambidexterity throughout different stages in the lifecycle. The proposed study can help to understand the role of ambidexterity in startups. Keywords start ups, ambidexterity, behavioral integration, lifecycle, innovation.

Will the Growth of Uber Increase Economic Welfare?

The urban car service firm Uber is currently the most highly valued private startup company in the world, with a venture capital valuation of over $68 billion based on direct investment of over $13 billion from numerous prominent Silicon Valley investors. Uber’s investors are not merely seeking a share of a still-competitive urban car service industry, but are openly pursuing global industry dominance and its huge valuation is based on expectations that it will be successful. The business media that ignored this industry for over a century now tracks Uber’s every move. The overwhelming majority of media and tech industry coverage presume that Uber’s powerful innovations make industry dominance inevitable and could produce financial returns similar to those achieved by Amazon, Facebook and other recent Silicon Valley backed startups. None of these media and industry expectations are based on objective analysis of Uber’s actual competitive economics, and they are inconsistent with Uber’s actual financial results. No one can explain how Uber could earn billions for its investors in an industry that historically has had razor-thin margins producing a commodity product. No one has been able to explain why an industry that has been competitively fragmented and structurally stable for a hundred years should suddenly consolidate into a global monopoly. No one can demonstrate a clear link between specific Uber product features and its meteoric growth, explain why no one else had ever recognized these opportunities, or document how they are powerful enough to allow Uber to rapidly drive all incumbent taxi and limo companies out of business. No one has attempted to explain how a company with such an allegedly powerful business model is still losing billions of dollars a year in its seventh year of operation, and why these losses are still increasing. No one has conducted an independent investigation of whether an unregulated dominant Uber would actually produce long-term improvements in the quality of urban transport. This paper lays out the economic evidence showing that Uber has no ability — now or in the foreseeable future — to earn sustainable profits in a competitive marketplace. Uber’s investors cannot earn returns on the $13 billion they have invested without achieving levels of market dominance that would allow them to exploit anti-competitive market power. The growth of Uber is entirely explained by massive predatory subsidies that have totally undermined the normal workings of both capital and labor markets. Capital has shifted from more productive to less productive uses, the price signals that allow drivers and customers to make welfare maximizing decisions have been deliberately distorted, and the laws and regulations that protect the public’s interest in competition and efficient urban transport have been seriously undermined. Absolutely nothing in the “narrative” Uber has used to explain its growth is supported by objective, verifiable evidence of its actual competitive economics.

A Proposed Method for Determining the Risk and IPR Adjusted Valuation of Private Start-Up Company

Attributing a valuation to the stock of a private start-up company often overlooks intellectual property related premiums and discounts. Proposed herein are additional specific IP-related premiums and discounts to be considered after standard premiums and discounts have been applied to a Net Adjusted book Value (NAV) valuation methodology.