Ownership Dynamics within Founder Teams: The Role of External Financing

Hellmann, Thomas, Schure, Paul, Tergiman, Chloe and Vo, Dan H. (2019) Ownership Dynamics within Founder Teams: The Role of External Financing. Saïd Business School Working Paper, Oxford.

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Abstract

This paper examines how founders within start-up teams dynamically re-adjust their relative ownership stakes. It leverages a unique dataset from British Columbia, Canada, which contains detailed information on founder ownership over time. Two trade-offs between efficiency and fairness are identified, one at the time of founding, the other as the venture develops. Teams with a preference for fairness at the start, as witnessed by an equal division of founder shares, also exhibit a dynamic preference for fairness, as witnessed by a reluctance to change ownership over time. Relative founder stakes are more likely to change when a company raises investments. Larger rounds, and lower valuations are associated with bigger changes in relative founder stakes.

Item Type: Oxford Saïd Research Paper
Keywords: finance
Subject(s): Finance
Date Deposited: 17 Aug 2017 08:55
Last Modified: 08 Feb 2019 16:27
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6487

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