- venture capital •
- board of directors •
- Corporate governance •
- Independent Directors •
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.
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 life cycle, and thus representing another potential source of value-add to entrepreneurial firm performance.