Who Finances Disparate Startups?

64 Pages Posted: 23 Apr 2021 Last revised: 29 Apr 2022

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: April 29, 2022


Dozens of mid-sized U.S. cities are fostering startups as regional technology hubs. Using detailed early-stage firm information from Crunchbase, we show such a diminishing industrial agglomeration trend driven by the angel financing. This trend is tied to angel investors’ unique portfolio selection of startups that diverges from venture capitals’ approach. Specifically, angel investors make geographically concentrated investments with industry diversification, while venture capital investors make industry-concentrated investments with relatively greater geographic diversification. We also show that angel investors’ portfolio selection of disparate startups enhances their average portfolio firm performance and plays an important economic role in forming the local entrepreneurial ecosystem.

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, Who Finances Disparate Startups? (April 29, 2022). 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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