Hiring a Co-Founder

35 Pages Posted: 3 Apr 2024

See all articles by Orie Shelef

Orie Shelef

University of Utah - David Eccles School of Business

Rujuta Vaidya

Norwegian School of Economics (NHH) - Department of Strategy and Management

Robert Wuebker

University of Utah - David Eccles School of Business

Date Written: February 28, 2024

Abstract

Using a novel set of administrative data, we demonstrate that founding teams often add "co-founders" - individuals newly associated with the firm with a substantial equity share - well after their venture has formalized. By taking advantage of the annual disclosure of private firm equity ownership in our dataset, we observe that approximately 12% of growing firms add such a co-founder in the first year following their incorporation. These non-investor, non-employee co-founders are identified across a broad range of sectors in our comprehensive, economy-wide sample. This phenomenon and its prevalence have received scant attention in prior work, including the literature on entrepreneurial founding teams, which tends to assume that the founding team formation process ends at a key early economic transition---in particular, formalization. The practice of adding a co-founder post-formalization raises interesting questions about the early organizational choices of new ventures, and suggests potentially underappreciated strategies for assembling human capital in young, growing firms.

Keywords: New Venture Teams, Strategic Human Capital, Entrepreneurship, Nascent Teams

JEL Classification: L26, M13, O31

Suggested Citation

Shelef, Orie and Vaidya, Rujuta and Wuebker, Robert, Hiring a Co-Founder (February 28, 2024). Available at SSRN: https://ssrn.com/abstract=4742193 or http://dx.doi.org/10.2139/ssrn.4742193

Orie Shelef

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.orieshelef.net

Rujuta Vaidya (Contact Author)

Norwegian School of Economics (NHH) - Department of Strategy and Management ( email )

Breiviksveien 40
N-5045 Bergen
Norway

Robert Wuebker

University of Utah - David Eccles School of Business ( email )

1645 East Campus Circle Drive
Salt Lake City, UT 84112-9304
United States

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