Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence

44 Pages Posted: 1 Nov 2000  

Thomas F. Hellmann

University of Oxford - Said Business School; University of British Columbia (UBC) - Sauder School of Business; University of Oxford - Said Business School

Manju Puri

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Multiple version iconThere are 3 versions of this paper

Date Written: September 2000

Abstract

This paper examines empirical evidence on the impact that venture capitalists can have on the development path of new firms. We use a hand-collected data set on Silicon Valley start-up companies that allows us to "look inside the black box" and analyze the influence of venture capital on the professionalization of firms' internal organization. The evidence suggests that there is a "soft" facet to venture capitalists, in terms of supporting companies to build up their human resources within the organization. Venture capital is also important at the top, in that venture capital backed companies are more likely and faster to bring in outsiders as CEOs. These CEO replacements are often accompanied with the founder departing from the company, suggesting that venture capitalists also exhibit a "hard" facet in terms of exercising control. The paper examines how these various roles are interrelated, and shows how the role of venture capital varies with the state of the company.

Suggested Citation

Hellmann, Thomas F. and Puri, Manju, Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence (September 2000). AFA 2001 New Orleans; Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=243149 or http://dx.doi.org/10.2139/ssrn.243149

Thomas F. Hellmann (Contact Author)

University of Oxford - Said Business School ( email )

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HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of British Columbia (UBC) - Sauder School of Business ( email )

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HOME PAGE: http://strategy.sauder.ubc.ca/hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

Manju Puri

Duke University - Fuqua School of Business ( email )

1 Towerview Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative

215 Morris St., Suite 300
Durham, NC 27701
United States

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