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Common Venture Capital Investors and Startup Growth

Author

Listed:
  • Ofer Eldar
  • Jillian Grennan

Abstract

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. After the law changes, we find increases in within-industry VC investment and common directors serving on startup boards. 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.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Ofer Eldar & Jillian Grennan, 2024. "Common Venture Capital Investors and Startup Growth," The Review of Financial Studies, Society for Financial Studies, vol. 37(2), pages 549-590.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:2:p:549-590.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad071
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    More about this item

    Keywords

    G32; G24; G28;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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