Structuring deals and governance after the IPO: Entrepreneurs and venture capitalists in high tech start-ups

In an effort to better understand the effects of venture capital investment on selected firm governance and financing structures, we examined the post-IPO experiences of 190 biotechnology and healthcare firms (see appendix). Our study revealed that in virtually all cases, the involvement of venture...

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Bibliographic Details
Published in:Business horizons 2006-07, Vol.49 (4), p.303-311
Main Authors: Williams, David R., Duncan, W. Jack, Ginter, Peter M.
Format: Article
Language:English
Subjects:
Biotechnology industry
Corporate governance
Entrepreneurs
Health care industry
Impact analysis
Initial public offerings
Initial public offerings (IPOs)
Startups
Studies
Venture capital
Venture capitalists
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Summary:In an effort to better understand the effects of venture capital investment on selected firm governance and financing structures, we examined the post-IPO experiences of 190 biotechnology and healthcare firms (see appendix). Our study revealed that in virtually all cases, the involvement of venture capitalists reduced the role of the founder-entrepreneur in strategic decision making. This was illustrated by the larger proportion of outside directors when venture capitalists invested and the smaller proportion of entrepreneurs who remained officers or in board positions after the IPO. We also found that venture capitalists rarely invested alone, and preferred to structure deals in which venture capital partners share both risks and rewards.
ISSN:0007-6813
1873-6068
DOI:10.1016/j.bushor.2005.11.001