Board Dynamics Over the Startup Life Cycle
59 Pages Posted: 28 Jul 2020 Last revised: 4 Feb 2022
Date Written: July 2020
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: Allocation of control, Board Of Directors, corporate governance, Independent Directors, Mediation role, venture capital
JEL Classification: G24, G34
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