The Color of Money: A Startup's Choice among Venture Capitalists
By Krishnamurthy Subramanian
Journal of Financial Intermediation
Citation
Subramanian, Krishnamurthy. (2017). The Color of Money: A Startup's Choice among Venture Capitalists Journal of Financial Intermediation .
Copyright
Journal of Financial Intermediation, 2017
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Abstract
Venture Capitalists (VCs) differ from one another in the non-financial resources they offer startups. This paper develops a model to study an entrepreneur's choice among disparate VCs. While greater non-financial resources foster specialization to the startup’s idea, they tempt the VC to hold up the entrepreneur. Such hold-up, however, adds value to the startup by engendering greater effort from the VC. VCs offering greater non-financial resources endogenously match with entrepreneurs possessing higher quality ideas. Therefore, unlike mutual funds that do not offer non-financial resources, performance persistence in VCs stems the non-financial resources and the VC’s ability to hold up the entrepreneur.

K. V. Subramanian is a Professor of Finance (currently on leave) at the Indian School of Business (ISB). He has served as an Executive Director at the International Monetary Fund and was the 17th Chief Economic Advisor to the Government of India from 2018 to 2021.

As Chief Economic Advisor, Professor Subramanian conceptualised India’s economic policy during the once-in-a-century COVID-19 pandemic. By correctly identifying COVID-19 as a huge supply-side shock, Professor Subramanian balanced supply- and demand-side measures, transformed fiscal policy to focus on public capital expenditure, and initiated path-breaking reforms to address structural problems. His foresight and vision enabled the Indian economy to emerge with high growth and strong macro fundamentals despite the Ukraine war following the pandemic.

His policy ideas drew on the path-breaking Economic Surveys. He authored Ethical Wealth Creation for a Prosperous India (2019-20), a Strategic Blueprint for India to Become a $5 Trillion Economy (2018-19), and the post-COVID-19 economy using public capital expenditures in infrastructure and healthcare to further counter-cyclical fiscal policy (2020-21). Acknowledging his contributions, the Hon’ble Prime Minister of India, Shri. Narendra Modi, praised his “academic brilliance, unique perspectives on economic and policy matters, and reformatory zeal.”

Professor Subramanian has been conferred the Distinguished Alumnus award by both his alma maters at IIT Kanpur and IIM Calcutta. He holds a PhD from the University of Chicago. His research spanning banking, law and finance, innovation and economic growth, and corporate governance has been published in the world's leading academic journals.

Krishnamurthy Subramanian
Krishnamurthy Subramanian