HBS Professor Joshua Lerner Presents at TusPark Ventures

Number of visits: Date:Jun 15,2015

Professor Joshua Lerner, the Jacob H. Schiff Professor of Investment Banking and head of the Entrepreneurial Management Unit at Harvard Business School, delivered a presentation at TusPark Ventures to several of the firm’s General Partners. Professor Lerner was recently named one of the 100 most influential people in private equity over the past decade by Private Equity International magazine and one of the ten most influential academics in the institutional investing world by Asset International's Chief Investment Officer magazine. Given the recent hype surrounding rising valuations in both Chinese and U.S. capital markets, in addition to the significant amount of VC fundraising, many have questioned whether we are currently in a bubble. Professor Lerner provided some highly valuable insight to answer this question by analyzing VC data in China and U.S. 

 

VC investment activity in 2015 for China and the U.S. are reaching historical highs. VC investments in China are expected to reach all-time highs, while in U.S. are expected to reach the highest level since the early 2000s.  However, when looking at VC investment as a percentage of public equity market capitalization, the story is quite different.  In China, VC as a percentage of equity market cap is currently around 0.0015%, close to the historical average and significantly below the peak of 0.003%.  In U.S., VC as a percentage of equity market cap is only around 0.0017%, below the historical average and significantly below the peak of 0.007% reached during the early 2000s.  Professor Lerner emphasized that just because supply – or the willingness of investors to provide capital – is high, doesn’t mean that we are necessarily in a bubble. 

 

Professor Lerner further emphasized that China and U.S. continue to be preeminent destinations for venture capital globally in part because of the high concentration of VC activity within several cities.  In China, VC activity is highly concentrated in Beijing, Shanghai and Shenzhen while in U.S., VC activity is concentrated in San Francisco, Boston and New York. This concentration of resources allows for the development of an ecosystem where VC firms are able to flourish. Conversely, venture capital activity in Europe is highly fragmented and resources are not centralized, leading to tepid VC activity. Ultimately, Professor Lerner’s presentation provided insightful and highly relevant analysis of the VC industry during a period in VC characterized by tremendous growth but high volatility.

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