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Venture Capitalists Get Paid Well to Lose Money

Harvard Business Review

The public pension funds, endowments, and foundations (called limited partners, or LPs) that foot the bill for the industry through their investments in VC funds do so to realize the outsized returns that VC claims to provide. There are, of course, individual firms that succeed in generating venture rates of return.

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

In particular, we are interested in how many of their responses correlate with what academic finance knows and what it teaches. Rather, they rely on internal rates of return and multiples of invested capital. the notion that debt financing can be “cheap” at certain times). What PE firms do after they invest.

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The Case for Stock Buybacks

Harvard Business Review

This means that it is better to return surplus capital in the form of repurchases (or through a special dividend) because increasing the ordinary dividend implicitly commits the firm to maintaining the higher dividend level in the future. Fewer companies would go public, instead financing themselves by taking on more debt.

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How the Next Generation Is Approaching Society’s Biggest Problems

Harvard Business Review

The old model — get a job, earn money, pay back — is being replaced by an earlier commitment to change. How did Sal Khan finance his venture? First, Sal Khan could have continued in finance and made far more money than he does in a nonprofit. If not, the investors receive a lower return and risk losing their capital.

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Don’t Take Money from VCs Until You’ve Asked 4 Questions

Harvard Business Review

They can also run into trouble syndicating later rounds of financing if other VC firms see that they are losing partners, or suspect that they are a “zombie” firm, unable to raise a subsequent fund. As a result, entrepreneurs are fully committed to the economic performance of their company. Insight Center.

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Can Impact Investing Avoid the Failures of Microfinance?

Harvard Business Review

One school of thought held that, for microfinance to scale and attract and maintain commercial capital, it needed to show that it could achieve market rates of return. First and foremost, we need mechanisms to insure we scale impact alongside financial return. Second, should microfinance make money, and if so, how much?