Early Venture Boards: A Grounded Theory of Optimising for Growth

Blagburn, Natalia (2020) Early Venture Boards: A Grounded Theory of Optimising for Growth. Doctoral thesis, Northumbria University.

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Abstract

Some early boards help startups achieve exponential high growth, whereas others leave founders and shareholders perplexed on how to get any value from them. Whilst over the past ten years the research on ventures and their boards has grown considerably, very little is still known about the inner working of boards, especially during the critical early stages of startup development. What seems to be missing, is the understanding of a complex interplay between directors’ attributes and behaviours, board role and processes, and venture performance in the context of unique challenges faced by high growth early ventures.
This study uses a classic grounded theory method to explore the experiences of directors on early boards of investor-backed tech startups in the UK. The investigation is done from the perspective of Venture Capital directors, which is then contextualised by looking more widely at experiences of Founders directors and independent Non-Executive directors. Altogether, data was systematically collected via interviews with 24 directors, representing experiences on boards of an estimated couple of hundreds of the UK early ventures.
As a result, the study developed a substantive grounded theory of Optimising for Growth. The findings suggest that directors on early venture boards engage in a complex process of optimising of board and director attributes, such as structures, processes, mindsets and adding value behaviours, against growth performance criteria of the next investment round. This process takes place over two stages: Evaluating and Structuring Stage and Behaving Bigger Stage, transforming the founder, the board and the company from a startup into a high growth venture. The developed grounded theory has also uncovered that the process of optimising is the first step in the boards’ longer-term efforts to professionalise startups into companies capable of delivering exit to investors via Initial Public Offering, thus providing a deeper understanding of what happens on early venture boards in context.
Having captured variations and the relationship between director attributes, board roles, board processes, value adding behaviours and company performance, the theory of Optimising for Growth also explains the differences in director experiences on early venture boards. The findings suggest the key differences arise when the early venture boards are fit for the purpose of monitoring as opposed to providing strategic help.
This study contributes to the corporate governance literature by proposing a substantive grounded theory as a novel integrative theoretical framework of the relationship between director attributes, board roles, board processes and company performance. The offered contribution integrates previously distinct perspectives from corporate governance, corporate finance and cognition, whilst also enriching the research on venture boards.
The thesis also contributes to practice by offering the theory of Optimising for Growth as a diagnostic tool for early venture directors. The tool can be used to understand, reflect and consider how to structure, align and develop the relationship between Founders and their boards.

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