The Ethics Illusion: Why Doing the Right Thing Isn't Simple for Venture Capital-Backed Founders

Entrepreneurship is a difficult field where the rate of failure is high, but for those that succeed, it's another test of its own. Having to manage a business requires dealing with finances, customers, but most importantly, yourself. Some founders turn to VC funding to make it easier, which is the focus of this paper. The goal is to explore how VC funding is hypothesized to cause founders to commit more misconduct compared to bootstrapped founders. Extensive research has shown many theories detailing the gears inside the founder’s head that lead down this path, ranging from agency theory, institutional theory, moral disengagement theory, and more. To test this, this paper proposes a method that compares 50 bootstrapped and 50 VC-backed startups. The study would utilize a binary logistic regression model, given access to accurate data and other resources. After the outcome of the test, the expected result is that VC-backed founders are more likely to participate in misconduct in comparison to bootstrapped ones. In other words, that is the alternate hypothesis and the goal is to reject the null hypothesis, that there was no significant difference between the two types of founders participating in misconduct.