Are VC Startups Run Better?
A pre-crash study says yes When a startup is funded by venture capitalists, it’s likely to be managed better than startups that get more traditional financing. That’s the finding of a recent study by two Stanford University Graduate School of Business professors who examined the experience of 173 high-technology Silicon Valley startups from 1994 to 1997, before the big dot-com bubble and subsequent crash. Thomas F. Hellmann and Manju Puri found that startups with venture-capital funding were more likely to quickly hire marketing executives. That’s an important milestone, says Hellmann, because it’s a sign that the company is ”serious and organized.” Moreover, startups were more likely to replace their founders with an outside CEO with experience if they had VC funding than if they didn’t receive such backing. That avoids one of the greatest pitfalls of new companies: relying too long on a founding entrepreneur who had the initial idea but may not have sufficient experience to manage
