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Analysis Group Financial and Competition Experts Detail the Venture Capital Ecosystem’s Contribution to Entrepreneurship and Innovation in the UK and Elsewhere
In their white paper titled “The Importance of Exit via Acquisition to Venture Capital, Entrepreneurship, and Innovation,” Manager Devin Reilly, Vice President David Toniatti, and Professor D. Daniel Sokol (USC Gould School of Law and Marshall School of Business) describe how the venture capital (VC) ecosystem’s cycle of funding, development, exit, and reinvestment has stimulated entrepreneurship and innovation across many industries.
Focusing in particular on the UK Competition and Markets Authority’s (CMA’s) stated goal of “driv[ing] dynamic innovation” in digital markets, the authors describe the VC cycle’s important role in stimulating innovation and growth. They discuss the many consumer benefits derived from acquisitions of small companies by larger companies, and document the regulatory, academic, entrepreneurial, and business environments that have led to the UK, and London in particular, becoming established as one of the leading locations for start-ups and VC investment.
The authors note that, in recent years, antitrust regulators in many countries have been critically reexamining the acquisition of start-ups and smaller businesses by much larger companies, particularly in digital markets. However, given the importance of exit via acquisition for providing incentives for VC, the authors conclude that failing to consider how policy changes may disrupt the VC ecosystem could result in unintended harm to investment, innovation, and ultimately, consumers.
The white paper, originally published on SSRN, is also the basis for “Why Exit via Acquisition Is Essential to Entrepreneurial Investment,” published on Columbia Law School’s Blue Sky Blog; “No Exit: A Threat to Venture Capital, Entrepreneurship, and Innovation,” published by Competition Policy International; and “Risk and Repeat: How the Venture Capital Ecosystem Drives Entrepreneurship and Innovation,” published on the Oxford Business Law Blog.
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Devin Reilly
Vice PresidentDr. Reilly specializes in the application of economic and financial analysis to litigation, regulatory investigations, and consulting efforts in a range of areas, including antitrust and competition, finance and securities, class certification, and intellectual property (IP). He has conducted economic analyses and led case teams in support of academic and industry experts. Dr. Reilly’s antitrust and competition case work includes analyzing market definition and competitive effects, two-sided markets, damages, and class certification, as well as supporting parties’ compliance with merger and investigative requests. His experience also includes analyzing lost profits, reasonable royalties, and commercial success in IP cases; evaluating materiality of disclosures in securities litigations; supporting industry experts in financial services matters; and analyzing class certification in technology, finance, and other industries. Dr. Reilly has worked on behalf of both the US government and prominent firms in industries such as technology, telecommunications, e-commerce, financial services, pharmaceuticals and medical devices, and manufacturing. His research on corporate governance, innovation and entrepreneurship, and public economics has been published in The Review of Financial Studies, among other publications. He currently serves as the Young Economist Representative for the American Bar Association’s Antitrust Magazine. Dr. Reilly received the Joel Popkin Graduate Student Teaching Prize in Economics and the Lawrence Robbins Prize in Economics, both from the University of Pennsylvania.