Risk-Seeking Corporate Governance
Several developments suggest that venture capitalists (VCs) are retreating from their traditional corporate governance role of monitoring their portfolio companies. Startup founders are retaining more equity and control over their companies, and contrary to past practice, some VCs say they will never remove a founder. At the same time, startups are taking unprecedented risks – defying regulators, growing in unsustainable ways, and racking up billion-dollar losses. There have also been a series of high-profile scandals at the likes of Uber, WeWork, FTX, where VCs have proven unable or unwilling to prevent founder misbehavior.
In a new article, we propose that … Read more