Startup (Dis)similarity and Types of Early-Stage Financing
53 Pages Posted: 23 Apr 2021 Last revised: 14 Sep 2021
Date Written: September 14, 2021
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
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