Document Type
Article
Publication Date
2020
Publication Citation
10 Harvard Business Law Review 49 (2020)
Abstract
Black & Gilson (1998) argue that an IPO-welcoming stock market stimulates venture deals by enabling VCs to give founders a valuable "call option on control." We study 18,000 startups to investigate the value of this option. Among firms that reach IPO, 60% of founders are no longer CEO. With little voting power, only half of the others survive three years as CEO. At initial VC financing, the probability of getting real control of a public firm for three years is 0.4%. Our results shed light on control evolution in startups, and cast doubt on the plausibility of the call-option theory linking stock and VC markets.
Recommended Citation
Brian Broughman & Jesse M. Fried,
Do Founders Control Start-up Firms that Go Public?,
10 Harvard Business Law Review 49 (2020)
(2020).
Available at:
https://www.repository.law.indiana.edu/facpub/2885