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Venture Capital and the Professionalization of Start‐Up Firms: Empirical Evidence
Author(s) -
Hellmann Thomas,
Puri Manju
Publication year - 2002
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/1540-6261.00419
Subject(s) - venture capital , professionalization , social venture capital , business , intermediary , empirical evidence , variety (cybernetics) , finance , initial public offering , stock (firearms) , financial capital , human capital , marketing , commerce , market economy , economics , political science , engineering , mechanical engineering , philosophy , epistemology , artificial intelligence , computer science , law
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.