Founding Team Dynamics

Abstract

We examine the effect of multiple founders on firm performance. We find that firms with multiple founders exhibit valuation premiums over firms with single-founders or professional managers. In addition, founder teams which have moderate heterogeneity performs best, while too much heterogeneity between founders detracts from firm performance. In particular, we find that occupational heterogeneity appears to be relatively more harmful. Founding teams perform better especially if cofounders have previously attended the same school or worked at the same institution. Overall, founder teams provide greater value to outside investors and this effect is most pronounced when the founders mirror one another along occupational dimensions.

Keywords: Heterogeneity, Co-founders, Diversity, Teams, Family firms

JEL Classification: G34, L25, L26, J24