NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Board Dynamics over the Startup Life Cycle

Michael Ewens, Nadya Malenko

NBER Working Paper No. 27769
Issued in September 2020
NBER Program(s):Corporate Finance, Productivity, Innovation, and Entrepreneurship

Venture capital (VC) backed firms face neither the governance requirements nor a major separation of ownership and control of their public peers. These differences suggest that independent directors could play a unique role on private firm boards. This paper explores the dynamics of VC-backed startup boards using new data on board member entry, exit, and individual director characteristics. We document several new facts about board size, the allocation of control, and composition dynamics. At formation, a typical board has four members and is entrepreneur-controlled. Independent directors are found on the median board after the second financing event, when control over the board becomes shared, with independent directors holding the tie-breaking vote. These patterns are consistent with independent directors playing both a mediating and advising role over the startup lifecycle, and thus representing another potential source of value-add to entrepreneurial firm performance.

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Document Object Identifier (DOI): 10.3386/w27769

 
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