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.

"Economic Aid to Post-conflict Countries: A Methodological Critique of Collier and Hoeffler"

This paper retests the analysis of "Aid Policy and Growth in Post-Conflict Societies," by Paul Collier and Anke Hoeffler (October 2002 and forthcoming in European Economic Review). It finds that their data and analysis do not support their conclusions and policy recommendations on the optimal timing and amounts of aid. These conclusions depend on very few observations (13 for the period of peace-onset, 13 for years 4 to 7 when a growth spurt is said to make aid particularly effective, and 8 for the period when aid should taper off); are vulnerable to the same methodological misspecifications identified in the Burnside and Dollar approach on which this analysis is based; and are not grounded in any theoretical formulation about the special relation between aid and growth in post-conflict conditions. Conventional econometric procedures are often not followed; recoding the sample to exclude cases that are not civil wars reduces the effect of aid on growth in post-civil war countries to less than half of what they claim; and the difference with the relationship for "normal" countries becomes negligible (0.26 percentage points), although it depends on identification of the sample. Their claims on the poverty-efficiency of aid are assumed, not analysed. The confidentiality of their policy measure (CPIA) prevented testing the aid-policy relationship.Economic aid Post-conflict Methodology

A Proposed Method for Monitoring U.S. Population Health: Linking Symptoms, Impairments, and Health Ratings

We propose a method of quantifying non-fatal health on a 0-1 QALY scale that details the impact of specific symptoms and impairments and is not based on ratings of counterfactual scenarios. Measures of general health status are regressed on health impairments and symptoms in different domains, using ordered probit and ordinary least squares regression. This yields estimates of their effects analogous to disutility weights, and accounts for complex non-additive relationships. Health measures used include self-rated health status on a 5-point scale, EuroQol 5D (EQ-5D) scores, and ratings of current health using a 0-100 rating scale and a time-tradeoff. Data are from the nationally representative Medical Expenditure Panel Survey (MEPS) year 2002 (N=34,615), with validation in an independent sample from MEPS 2000 (N=21,067) and among 1420 adults age 45-89 in the Beaver Dam Health Outcomes Study. Decrement weights for symptoms and impairments are used to derive estimates of overall health-related quality of life, laying the groundwork for a detailed national summary measure of health. To purchase a copy of the earlier version of this paper, please contact the Working Papers department directly at (617) 588 1405.

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.

Negativity about the outcomes of extreme prematurity a persistent problem - a survey of health care professionals across the North Queensland region

Background: Extremely preterm babies are at risk of significant mortality and morbidity due to their physiological immaturity. At periviable gestations decisions may be made to either provide resuscitation and intensive care or palliation based on assessment of the outlook for the baby and the parental preferences. Health care professionals (HCP) who counsel parents will influence decision making depending on their individual perceptions of the outcome for the baby. This paper aims to explore the knowledge and attitudes towards extremely preterm babies of HCP who care for women in pregnancy in a tertiary, regional and remote setting in North Queensland. Methods: A cross sectional electronic survey of HCP was performed. Perceptions of survival, severe disability and intact survival data were collected for each gestational age from 22 to 27 completed weeks gestation. Free text comment enabled qualitative content analysis. Results: Almost all 113 HCP participants were more pessimistic than the actual outcome data suggests. HCP caring for women antenatally were the most pessimistic for survival (p = 0.03 at 23 weeks, p = 0.02 at 25,26 and 27 weeks), severe disability (p = 0.01 at 24 weeks) and healthy outcomes (p = 0.01 at 24 weeks), whilst those working in regional and remote centres were more negative than those in tertiary unit for survival (p = 0.03 at 23,24,25 weeks). Perception became less negative as gestational age increased. Conclusion: Pessimism of HCP may be negatively influencing decision making and will negatively affect the way in which parents perceive the chances of a healthy outcome for their offspring

Effectiveness of interventions to enhance shared decision making in wound care: A systematic review

Aims: To explore the effectiveness of interventions to enhance patient participation in shared decision making in wound care and tissue viabilityBackground: Caring for people living with a wound is complex due to interaction between wound healing, symptoms, psychological wellbeing, and treatment effectiveness. To respond to this complexity, there has been recent emphasis on the importance of delivering patient centred wound care and shared decision making to personalise health care. However, little is known about the effectiveness of existing interventions to support shared decision making in wound care.Design: Systematic review of interventional studies to enhance shared decision making in wound care or tissue viability. This was reported following the Preferred Reporting Items for Systematic Reviews and Meta-Analysis (PRISMA) guidelines 2020.Methods: Interventional primary research studies published in English up to January 2023 were included. Screening, data extraction and quality appraisal were undertaken independently by two authors.Data sources: Medline, EMBASE, Cochrane Central Register of Controlled Trails (trials database), CINAHL, British Nursing Index (BNI), WorldCat (thesis database), Scopus and registries of ongoing studies (ISRCTN registry and clinicaltrials.gov).Results: 1,063 abstracts were screened, and eight full-text studies included. Findings indicate, interventions to support shared decision making are positively received. Goal or need setting components may assist knowledge transfer between patient and clinician, and could lower short term decisional conflict. However, generally findings within this study had very low certainty due to the inconsistencies in outcomes reported, and the variation and complexity of single and multiple interventions used.Conclusions: Future research on shared decision making interventions in wound care should include the involvement of stakeholders and programme theory to underpin the interventions developed to consider the complexity of interventions.Registration: The review protocol was prospectively registered (PROSPERO database: CRD42023389820).No Patient or Public Contribution: Not applicable as this is a systematic review