When Do Venture Capitalists Become Board Members in New Ventures?

Abstract

We explore factors determining board membership of venture capitalists (VCs) in a syndicate in privately held entrepreneurial ventures. We suggest that board membership is determined by the bargaining process between VCs and new ventures in governing those ventures. Specifically, VCs are more likely to become board members in new ventures if they are highly reputable due to the success of their prior new venture investees, whereas VCs are less likely to gain board rights in new ventures with greater bargain power from superior innovation or marketing track records. Our empirical analysis using 1,812 dyads of investment ties formed between VCs and new ventures support our predictions.

Citation

Park, H.D. and Steensma, H.K. (2014), "When Do Venture Capitalists Become Board Members in New Ventures?", Finance and Strategy (Advances in Strategic Management, Vol. 31), Emerald Group Publishing Limited, Leeds, pp. 231-251. https://doi.org/10.1108/S0742-332220140000031006