Download This PaperCommon Venture Capital Investors and Startup Growth
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
155 Pages Posted: 24 Jun 2019 Last revised: 15 Mar 2023
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: Suggested Citation
Duke Innovation & Entrepreneurship Initiative ( email )
215 Morris St., Suite 300
Durham, NC 27701
United States
Katherine Waldock
Georgetown University McDonough School of Business ( email )
3700 O Street, NW
Washington, DC 20057
United States