Benchmarking the Returns to Venture

We describe a new index of the current and historical returns to venture-type capital. The conceptual basis for the index is the value of a continuously reinvested value-weighted portfolio of all venture-backed and similar pre-public companies. It provides a metric for private equity comparable to the S&P 500 for public equity. We build the index from valuations revealed in episodic transactions in the companies' shares - private placements of new rounds of equity funding, IPOs, acquisitions, and liquidations. Our approach to dealing with the episodic nature of the data is similar to the one used in constructing indexes of real-estate value from transaction data for individual properties. We have extended earlier sources of data to deal with selection bias - we tracked down unfavorable valuations that were less likely to be reported in the earlier data. We also use econometric techniques to handle the remaining selection bias. The resulting index has important uses in marking venture portfolios to market and in assessing the performance of venture investments.

The Incentives to Start New Companies: Evidence from Venture Capital

The standard venture-capital contract rewards entrepreneurs only for creating successful companies that go public or are acquired on favorable terms. As a result, entrepreneurs receive no help from venture capital in avoiding the huge idiosyncratic risk of the typical venture-backed startup. Entrepreneurs earned an average of $9 million from each company that succeeded in attracting venture funding. But entrepreneurs are generally specialized in their own companies and bear the burden of the idiosyncratic risk. Entrepreneurs with a coefficient of relative risk aversion of two would be willing to sell their interests for less than$1 million at the outset rather than face that risk. The standard financial contract provides entrepreneurs capital supplied by passive investors and rewards entrepreneurs for successful outcomes. We track the division of value for a sample of the great majority of U.S. venture-funded companies over the period form 1987 through 2005. Venture capitalists received an average of $5 million in fee revenue from each company they backed. The outside investors in venture capital received a financial return substantially above that of publicly traded companies, but that the excess is mostly a reward for bearing risk. The pure excess return measured by the alpha of the Capital Asset Pricing Model is positive but may reflect only random variation.

Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence

Mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers' lack of knowledge and experience. We study the compensation that borrowers pay to mortgage brokers for assistance from application to closing. Two findings support the conclusion that confused borrowers overpay for brokers' services: (1) A model of effective shopping shows that borrowers sacrifice at least $1,000 by shopping from too few brokers. (2) Borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash.

The Burden of the Nondiversifiable Risk of Entrepreneurship

In the standard venture capital contract, entrepreneurs have a large fraction of equity ownership in the companies they found and are paid a sub-market salary by the investors who provide the money to develop the idea. The big rewards come only to those whose companies go public or are acquired on favorable terms, forcing entrepreneurs to bear a substantial burden of idiosyncratic risk. We study this burden in the case of high-tech companies funded by venture capital. Over the past 20 years, the typical venture-backed entrepreneur earned an average of $4.4 million from companies that succeeded in attracting venture funding. Entrepreneurs with a coefficient of relative risk aversion of two and with less than$0.7 million would be better off in a salaried position than in a startup, despite the prospect of an average personal payoff of $4.4 million and the possibility of payoffs over$1 billion. We conclude that startups attract entrepreneurs with lower risk aversion, higher initial assets, preferences for entrepreneurship over employment, and optimistic beliefs about the payoffs from their products.

A Spitzer Study of Comets 2P/Encke, 67P/Churyumov-Gerasimenko, and C/2001 HT50 (LINEAR-NEAT)

We present infrared images and spectra of comets 2P/Encke, 67P/Churyumov-Gerasimenko, and C/2001 HT50 (LINEAR-NEAT) as part of a larger program to observe comets inside of 5 AU from the sun with the Spitzer Space Telescope. The nucleus of comet 2P/Encke was observed at two vastly different phase angles (20 degrees and 63 degrees). Model fits to the spectral energy distributions of the nucleus suggest comet Encke's infrared beaming parameter derived from the near-Earth asteroid thermal model may have a phase angle dependence. The observed emission from comet Encke's dust coma is best-modeled using predominately amorphous carbon grains with a grain size distribution that peaks near 0.4 microns, and the silicate contribution by mass to the sub-micron dust coma is constrained to 31%. Comet 67P/Churyumov-Gerasimenko was observed with distinct coma emission in excess of a model nucleus at a heliocentric distance of 5.0 AU. The coma detection suggests that sublimation processes are still active or grains from recent activity remain near the nucleus. Comet C/2001 HT50 (LINEAR-NEAT) showed evidence for crystalline silicates in the spectrum obtained at 3.2 AU and we derive a silicate-to-carbon dust ratio of 0.6. The ratio is an order of magnitude lower than that derived for comets 9P/Tempel 1 during the Deep Impact encounter and C/1995 O1 (Hale-Bopp).Comment: Accepted for publication in the Astrophysical Journal 48 pages, 15 figures, 10 table

Epifania, recriação e ressentimento: fragmentos narrativos sobre a experiência da viagem na imigração italiana no Brasil

L'expérience du voyage dans le processus de l'immigration marque le premier contact avec l'inconnu. L'aventure de la traversée de l'océan signifie par conséquent l'abandon du seul monde tangible. Le nouveau monde va se dévoiler à l'émigrant au fur et à mesure que le navire avance en mer, en un mélange de représentations produites avant le départ et de nouvelles “idées-images” que l'expérience elle-même du voyage contribue à élaborer en continu. Au cours de ce processus, la lecture de "Sull'Oceano" d’Edmondo De Amicis permet une immersion dans ce monde fragmentaire d'images et des récits que l'émigrant va produire. Il tente par ce biais de comprendre sa propre expérience et son existence, en un monde entrecroisé de différentes expressions de la sensibilité. Lê nouveau monde se révèle, souvenir tout à la fois d’une terre que l’on a abandonnée et recréation d'une représentation pacificatrice

Mechanisms for a nutrient-conserving carbon pump in a seasonally stratified, temperate continental shelf sea

Continental shelf seas may have a significant role in oceanic uptake and storage of carbon dioxide (CO2) from the atmosphere, through a ‘continental shelf pump’ mechanism. The northwest European continental shelf, in particular the Celtic Sea (50°N 8°W), was the target of extensive biogeochemical sampling from March 2014 to September 2015, as part of the UK Shelf Sea Biogeochemistry research programme (UK-SSB). Here, we use the UK-SSB carbonate chemistry and macronutrient measurements to investigate the biogeochemical seasonality in this temperate, seasonally stratified system. Following the onset of stratification, near-surface biological primary production during spring and summer removed dissolved inorganic carbon and nutrients, and a fraction of the sinking particulate organic matter was subsequently remineralised beneath the thermocline. Water column inventories of these variables throughout 1.5 seasonal cycles, corrected for air-sea CO2 exchange and sedimentary denitrification and anammox, isolated the combined effect of net community production (NCP) and remineralisation on the inorganic macronutrient inventories. Overall inorganic inventory changes suggested that a significant fraction (>50%) of the annual NCP of around 3 mol-C m–2 yr–1 appeared to be stored within a long-lived organic matter (OM) pool with a lifetime of several months or more. Moreover, transfers into and out of this pool appeared not to be in steady state over the one full seasonal cycle sampled. Accumulation of such a long-lived and potentially C-rich OM pool is suggested to be at least partially responsible for the estimated net air-to-sea CO2 flux of ∼1.3 mol-C m–2 yr–1 at our study site, while providing a mechanism through which a nutrient-conserving continental shelf pump for CO2 could potentially operate in this and other similar regions