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Ilya Strebulaev: Focusing on the Finance and Governance of Venture-Backed Companies.

Ilya Strebulaev: Focusing on the Finance and Governance of Venture-Backed Companies.

Episode 21 Published 5 years, 7 months ago
Description
  1. Start of interview [1:19]
  2. Ilya's "origin story" [1:50]
    1. Lomonosov Moscow State University ('97)
    2. New Economic School (NES) ('99)
    3. London Business School, PhD Finance ('04)
  3. His start as a Professor at the Stanford Graduate School of Business (2004-Present) [7:08]
  4. His initial interest in the field of venture capital  [7:56] "These days my major problem is that there are so many research projects, and I have to juggle 10 different (amazing) research projects at the same time."
  5. Why governance of venture-backed companies has been historically under researched by finance scholars (it has to do with the "quantification revolution" from the 70s-80s). [12:08]
  6. His article "The Economic Impact of Venture Capital: Evidence from Public Companies" co-authored with Will Gornall (2015) [14:29]
    1. "This is important to mention: venture capital is an American phenomenon, since 2016 every single day the top 5 U.S. public companies by market cap were venture-backed, and from the top 100 there is a significant proportion. But most importantly they are young companies that grow very fast."
  7. His article "How Do Venture Capitalists Make Decisions?" co-authored with: Paul A. Gompers, Will Gornall, Steven N. Kaplan (2016) [20:40]
    1. Differences between VCs focused in IT and healthcare
    2. Differences in terms of geography (i.e., west coast v. east coast, U.S. v. international)
    3. Differences in early stage vs late stage.
    4. Deal flow, deal selection, and post-investment value-added as contributors to value creation
    5. Investment selection (jockey v. horse framework)
  8. His article "Squaring Venture Capital Valuations with Reality" co-authored with Will Gornall (2017) [32:37]. They wrote this paper because:
    1. It is difficult to apply traditional financial methodology (such as DCF or CAPM) to early stage startups.
    2. Whenever the valuation of venture-backed companies was reported in the press or in commercial datasets,  it did not make sense to him (not the price, but the way it was reported).
    3. They used the example of Square's post money valuation pre-IPO.
    4. They created a new valuation model for startups (they found that the average unicorn in their sample had 8 classes of shares).
  9. His current research on governance of venture-backed companies [41:12]
    1. In venture-backed companies boards are very "unstable" due to staged financing.
    2. Board control, voting rights and protective provisions.
    3. Stanford Venture Capital Initiative: one of its goals is to improve the quality of the data in venture-capital. Some projects:
      1. Study of evolution of corporate governance in venture-backed companies.
      2. The anatomy of down-round financings.
  10. His take on the "
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