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Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence

  • Thomas Hellmann

    (Graduate School of Business, Stanford University,)

  • Manju Puri

    (Graduate School of Business, Stanford University and NBER)

This paper examines the impact venture capital can have on the development of new firms. Using a hand-collected data set on Silicon Valley start-ups, we find that venture capital is related to a variety of professionalization measures, such as human resource policies, the adoption of stock option plans, and the hiring of a marketing VP. Venture-capital-backed companies are also more likely and faster to replace the founder with an outside CEO, both in situations that appear adversarial and those mutually agreed to. The evidence suggests that venture capitalists play roles over and beyond those of traditional financial intermediaries. Copyright The American Finance Association 2002.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 57 (2002)
Issue (Month): 1 (02)
Pages: 169-197

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Handle: RePEc:bla:jfinan:v:57:y:2002:i:1:p:169-197
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