Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence
Thomas F. Hellmann
University of British Columbia - Sauder School of Business
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
Journal of Finance, Vol. 57, pp. 169-197, 2002
This paper examines the impact venture capital can have on the development of new firms. Using a hand-collected data set on Silicon Valley start-ups, we find that venture capital is related to a variety of professionalization measures, such as human resource policies, the adoption of stock option plans, and the hiring of a marketing VP. Venture-capital-backed companies are also more likely and faster to replace the founder with an outside CEO, both in situations that appear adversarial and those mutually agreed to. The evidence suggests that venture capitalists play roles over and beyond those of traditional financial intermediaries.
Accepted Paper Series
Date posted: November 17, 2003
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