Board Dynamics Over the Startup Life Cycle

62 Pages Posted: 13 Jul 2020 Last revised: 24 Jan 2022

See all articles by Michael Ewens

Michael Ewens

Columbia Business School; National Bureau of Economic Research (NBER)

Nadya Malenko

University of Michigan, Stephen M. Ross School of Business; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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Date Written: January 11, 2022

Abstract

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

Suggested Citation

Ewens, Michael and Malenko, Nadya, Board Dynamics Over the Startup Life Cycle (January 11, 2022). European Corporate Governance Institute – Finance Working Paper No. 687/2020, Available at SSRN: https://ssrn.com/abstract=3640898 or http://dx.doi.org/10.2139/ssrn.3640898

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Nadya Malenko

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