Common Venture Capital Investors and Startup Growth

155 Pages Posted: 24 Jun 2019 Last revised: 15 Mar 2023

See all articles by Ofer Eldar

Ofer Eldar

Duke University - School of Law and Fuqua School of Business; European Corporate Governance Institute (ECGI); Duke Innovation & Entrepreneurship Initiative

Jillian Grennan

Santa Clara University, Leavey School of Business; Santa Clara University School of Law; University of California, Berkeley, Haas School of Business, Institue for Business and Social Impact

Katherine Waldock

Georgetown University McDonough School of Business

Date Written: June 10, 2020

Abstract

We exploit the staggered introduction of liability waivers when investors hold stakes in conflicting business opportunities as a shock to venture capital (VC) investment and director networks. We find increases in within-industry VC investment and common directors serving on startup boards after the law changes. Despite the potential for rent-extraction, same-industry startups inside VC portfolios benefit by raising more capital, failing less, and exiting more successfully. VC directors serving on other startup boards are the primary mechanism associated with positive outcomes, consistent with common VC investment facilitating informational exchanges in VC portfolios.

Keywords: Entrepreneurship, Startups, Venture Capital, Corporate Governance, Fiduciary Duty, Duty of Loyalty, Conflict of Interest, Corporate Opportunity Waivers, Board of Directors, Initial Public Offerings (IPOs), Raising Capital

JEL Classification: G32, G24, G28

Suggested Citation

Eldar, Ofer and Grennan, Jillian and Waldock, Katherine, Common Venture Capital Investors and Startup Growth (June 10, 2020). Duke Law School Public Law & Legal Theory Series No. 2019-42, Georgetown McDonough School of Business Research Paper No. 3406205, European Corporate Governance Institute – Finance Working Paper No. 902/2023, Available at SSRN: https://ssrn.com/abstract=3406205 or http://dx.doi.org/10.2139/ssrn.3406205

Ofer Eldar

Duke University - School of Law and Fuqua School of Business ( email )

210 Science Dr
Durham, NC 27708-9985
United States
27705 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Duke Innovation & Entrepreneurship Initiative ( email )

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

Jillian Grennan (Contact Author)

Santa Clara University, Leavey School of Business ( email )

Santa Clara, CA 95053
United States

Santa Clara University School of Law ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

University of California, Berkeley, Haas School of Business, Institue for Business and Social Impact ( email )

Berkeley, CA 94720
United States

Katherine Waldock

Georgetown University McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,190
Abstract Views
6,199
Rank
27,720
PlumX Metrics