Abstract
Many startups are commonly-held by the same venture capital (VC) investors. We exploit the staggered introduction of liability exemptions when investors hold stakes in conflicting business opportunities as a shock to common ownership. We find increases in common ownership and directors serving on rivals' boards after the law changes. Despite the potential for rent-extraction, commonly-held startups benefit by raising more capital through more investment rounds. Moreover, they are less likely to fail and exit more successfully through IPOs or acquisitions by another commonly-held startup. These successful startup outcomes are linked to VC directors serving on other startup boards.
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