Notes on Matching in Entrepreneurial Finance Networks
español We are glad our paper (with Virginia Sarria Allende and Gabriela Robiolo) went out in Venture Capital : A International Entrepreneurial Finance Journal. A working paper version is available here. Here are some brief comments on the ideas, the econometrics, and data approach: In the paper we study the “matching” between investors and startups in the entrepreneurial finance market. Broadly speaking, we are concerned with the question of who will invest in who, and in the role played by (social, professional) networks in the explanation. Specifically, we show evidence on a simple idea: due to information related frictions in the entrepreneurial finance market, being closer in the network of connections actually matters for matching. Being closer increases not only the attractiveness of a prospective match, but also makes observable attributes more attractive. But “being closer” has a particular interpretation here. Our measured networked connections, are not the typical social (or follower) style of connections. We recognize a link if there is information that you have worked, invested, mentored, etc. a common startup or organization in the past. So we could say that these are really costly (or “signally meaningful”, in Spence’s sense) connections. For founders (or prospective investors alike)…