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Regular version of the site

Article

Owners and CEOs of Startups: Evidence from Russia

Journal of Corporate Finance Research. 2019. Vol. 13. No. 1. P. 107-119.
Guseva O., Stepanova A. N.

In this paper, the authors focus on two primary governance mechanisms which can be considered as sources of support for startup companies: the company’s ownership contingent and the company’s management personnel. Based on descriptive statistics from a sample of 416 Skolkovo start-ups from the ‘Nuclear’ and ‘Space’ clusters, and a Start-up-Barometer survey of 300 IT-entrepreneurs, this work provides new insights into ownership and management characteristics of Russian startups and the interplay between these dynamics.

The Russian venture market presents an interesting case of an emerging market with a number of successful startups in a challenging economic environment. The supply of venture capital for Russian startups is restricted by the presence of sanctions and legal restrictions on the investments of financial institutions such as pension funds and banks. Therefore, similar to other developed and developing markets, the most significant source of investments for Russian startups is bootstrapping.

In this paper we show that startups with different characteristics attract different kinds of investors, which is reflected in the companies ownership structures. In particular, government development institutes are more interested in investing in nuclear-focused startups, while corporate investors tend to keep a higher level of control over startups compared to other investors. We also confirmed the presence of correlations between different types of owners: government development institutions, corporate investors, venture funds, and family members. Additionally, the size of equity share for all types of owners (except family members) was found to be negatively correlated with the CEO’s share in the ownership structure.

Although the purpose of the article is descriptive, it motivates further research on the sources of support of startup growth, including relative importance of such sources and their effects on startup performance.