Family Roots, Startup Wings: Balancing Control and Growth in Family Startups Seeking VC Financing

Little is known about how family firms finance growth in their early stages. This paper reveals that 5.4% of all VC rounds support family startups. The latter access VC financing later and take longer to deliver investor exits than non-family startups. When seeking VC financing, family startups raise smaller financing rounds, resulting in less dilution and fewer board seats for their investors. Exploring performance outcomes, this paper demonstrates that while investors are less successful when investing in family startups, the latter disproportionally benefit from VC financing, achieving higher revenue growth post-VC financing than non-family startups.