Board Dynamics Over the Startup Life Cycle
62 Pages Posted: 13 Jul 2020 Last revised: 24 Jan 2022
Date Written: January 11, 2022
We explore the dynamics of venture capital (VC)-backed startup boards using novel data on director entry, exit, and characteristics. At formation, a typical board is entrepreneur-controlled. Independent directors join the median board after the second financing, when control becomes shared, and hold a tie-breaking vote. Their presence is particularly likely when the potential for VC-entrepreneur conflicts is higher. At later stages, control switches to VCs and independent director characteristics change. These patterns are consistent with independent directors playing both a mediating and advising role over the startup life cycle, and thus representing another potential source of value-add to startup performance.
Keywords: venture capital, board of directors, corporate governance, independent directors, mediation
JEL Classification: G24,G34
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