Common Venture Capital Investors and Startup Growth

Common Venture Capital Investors and Startup Growth

Ofer Eldar, Jillian Grennan, Katherine Waldock

Series number :

Serial Number: 
902/2023

Date posted :

March 13 2023

Last revised :

March 13 2023
SSRN Share

Keywords

  • Entrepreneurship • 
  • Startups • 
  • venture capital • 
  • Corporate governance • 
  • fiduciary duty • 
  • duty of loyalty • 
  • Conflict of interest • 
  • corporate opportunity waivers • 
  • board of directors • 
  • initial public offerings (IPOs) • 
  • Raising Capital

We exploit the staggered introduction of liability waivers when investors hold stakes in conflicting business opportunities as a shock to venture capital (VC) investment and director networks. We find increases in within-industry VC investment and common directors serving on startup boards after the law changes.

Despite the potential for rent-extraction, same-industry startups inside VC portfolios benefit by raising more capital, failing less, and exiting more successfully. VC directors serving on other startup boards are the primary mechanism associated with positive outcomes, consistent with common VC investment facilitating informational exchanges in VC portfolios.

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Authors

Real name:
Jillian Grennan
Real name:
Katherine Waldock