Matching in Entrepreneurial Finance Networks
47 Pages Posted: 8 Jul 2016 Last revised: 1 Oct 2017
Date Written: September 30, 2017
We empirically explore the importance of networks in the match formation of startups and investors. Using a massive network of connections from the entrepreneurial finance setting in California, we estimate a matching model introducing network distance as a key determinant of the value of a prospective match. We find that distance drives matching value and moderates preferences for experience and education. While we corroborate that there is significant sorting along these preferences in realized matches, our results indicate that network distance can potentially outweigh their impact, emphasizing the role of networks in alleviating matching frictions in these markets.
Keywords: Entrepreneurial Finance, Networks
JEL Classification: G24, L26, L14
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