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More than Money: Venture Capitalists on Boards

Author

Listed:
  • Natee Amornsiripanitch
  • Paul A Gompers
  • Yuhai Xuan

Abstract

We explore patterns of board structure and function in the venture capital industry, identifying factors that influence whether venture capitalists receive a board seat and whether they take action to help portfolio companies in which they invest. In a comprehensive sample of US-based and non-US-based companies, we find that a venture capital firm’s prior relationship with the founder, lead investor status, track record, network size, and geographical proximity to the portfolio company are positively correlated with its likelihood of taking a board seat in an investment round. When venture capital investors serve on the board, portfolio companies tend to recruit managers and board members from these investors’ network and are more likely to exit via relationship-based acquisitions. These patterns are particularly strong for successful and well-connected venture capitalists on the board.

Suggested Citation

  • Natee Amornsiripanitch & Paul A Gompers & Yuhai Xuan, 2019. "More than Money: Venture Capitalists on Boards," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 35(3), pages 513-543.
    • Handle: RePEc:oup:jleorg:v:35:y:2019:i:3:p:513-543.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewz010
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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