Is the Crowd Sensitive to Distance? — How Investment Decisions Differ by Investor Type

Abstract

This paper presents the first evidence of the influence of geographic distance among retail, accredited, and overseas investors and venture location in an equity crowdfunding context. By analyzing investment decisions, we show that geographic distance is negatively correlated with investment probability for all investor types. Our comparison of home country and overseas investors reveals that overseas investors are sensitive to distance, but considerably less so than home country investors. However, when comparing only home country investors (subdivided into retail and the more sophisticated accredited), we document that both investor types are similarly sensitive to the distance of possible ventures.

Keywords: Distance, Equity Crowdfunding, Entrepreneurial Finance, Entrepreneurship, Home Bias, Internet

JEL Classification: G24, G32, M13, K22, L26