Outside Directors at Early-Stage Startups

50 Pages Posted: 31 Jan 2019 Last revised: 16 Apr 2020

See all articles by Buvaneshwaran Venugopal

Buvaneshwaran Venugopal

University of Central Florida - College of Business Administration

Vijay Yerramilli

University of Houston, C. T. Bauer College of Business

Date Written: January 21, 2019

Abstract

We document substantial variation across startups in whether and when they appoint outside directors, and the type of directors they appoint. The startup-director match depends on professional connections and individual experience profiles. Early-stage investors are more likely to serve as outside directors when there is a local scarcity of directors. Outside directors leverage their professional connections to attract new investors, directors, top executives, and potential acquirers for startups. Overall, presence of an early-stage outside director is associated with better funding outcomes and higher probability of exit through IPO, although presence of an investor-director makes exit via acquisition more likely.

Keywords: Board of Directors, Startups

JEL Classification: G24, G34, L26, M13

Suggested Citation

Venugopal, Buvaneshwaran and Yerramilli, Vijay, Outside Directors at Early-Stage Startups (January 21, 2019). Available at SSRN: https://ssrn.com/abstract=3320010 or http://dx.doi.org/10.2139/ssrn.3320010

Buvaneshwaran Venugopal (Contact Author)

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

Vijay Yerramilli

University of Houston, C. T. Bauer College of Business ( email )

Houston, TX 77204
United States
713-743-2516 (Phone)

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