Matching in Entrepreneurial Finance Networks
By Ricardo Anibal Pasquini, Gabriela Robiolo & Virginia Sarria-Allende (Universidad Austral)
Abstract: 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 were network distance can both determine the value of a prospective match as well as moderate observable complementarities. We find that distance drives matching value and moderates preferences for experience and education. While we corroborate that there is significant sorting along this preferences in realized matches, our results indicate that connections can potentially outweigh them, emphasizing the role of networks in alleviating matching frictions in these markets.
Full Article: Social Science Research Network