Startup (Dis)similarity and Types of Early-Stage Financing

53 Pages Posted: 23 Apr 2021 Last revised: 14 Sep 2021

See all articles by S. Katie Moon

S. Katie Moon

University of Colorado at Boulder - Leeds School of Business

Paula Suh

University of Georgia - Terry College of Business

Date Written: September 14, 2021

Abstract

Using the data from Crunchbase, the leading platform for detailed information on early-stage firms, we document evidence of geographic dispersion and industry declustering of new startups over time. We show that this trend is associated with investment incentives of local angel investors. Specifically, angel investors are more likely to provide early-stage fundings to a firm dissimilar to its geographic peers. We find that this result is attributable to the different diversification preferences of angel investors. Angel investors make geographically concentrated investments with industry diversification, while venture capital investors make industry-concentrated investments with relatively greater geographic diversification.

Keywords: Startup Geographic Location, Startup Business Similarity, Angel Investment, Venture Capital Investment

JEL Classification: G00, L26, M13, L00

Suggested Citation

Moon, Katie and Suh, Paula, Startup (Dis)similarity and Types of Early-Stage Financing (September 14, 2021). Available at SSRN: https://ssrn.com/abstract=3831951 or http://dx.doi.org/10.2139/ssrn.3831951

Katie Moon

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Paula Suh (Contact Author)

University of Georgia - Terry College of Business ( email )

600 S. Lumpkin Street
Amos Hall, B314
Athens, GA 30602
United States

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