Publications
Publications
- 2023
- HBS Working Paper Series
Founder-CEO Compensation and Selection into Venture Capital-Backed Entrepreneurship
By: Michael Ewens, Ramana Nanda and Christopher Stanton
Abstract
We show theoretically that a critical determinant of the attractiveness of VC-backed entrepreneurship for high-earning potential founders is the expected time to develop a startup’s initial product. This is because founder-CEOs’ cash compensation increases substantially after product development, alleviating the non-diversifiable risk that founders face at startup birth. Consistent with the model’s predictions of where the supply of entrepreneurial talent is likely to be most constrained, we find that tech-nological shocks differentially altering the expected time to product across industries can explain changes in both the rate of entry and characteristics of individuals selecting into VC-backed entrepreneurship.
Keywords
Citation
Ewens, Michael, Ramana Nanda, and Christopher Stanton. "Founder-CEO Compensation and Selection into Venture Capital-Backed Entrepreneurship." Harvard Business School Working Paper, No. 20-119, May 2020. (Revise and Resubmit at Journal of Finance. Revised January 2023.)