How Smart is Smart Money? A Two-Sided Matching Model of Venture Capital

Sørensen, Morten

doi:10.2139/ssrn.878692

Cited by 190 publications

(238 citation statements)

References 40 publications

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“…This kind of identity disclosure in online personas has been shown to have significant economic outcomes in electronic markets (Ghose and Ipeirotis 2011;Ghose et al 2012). Notably, reputation and recognition are both factors that have proven to be quite important in offline venture capital, because high profile and well-regarded investors are better able to drive follow on investment (Hochberg et al 2007;Sørensen 2007;Sorenson and Stuart 2001).…”

Section: Managerial Implicationsmentioning

confidence: 99%

The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

2015

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Online crowdfunding has received a great deal of attention from entrepreneurs and policymakers as a promising avenue to fostering entrepreneurship and innovation. A notable aspect of this shift from an offline to an online setting is that it brings increased visibility and traceability of transactions. Many crowdfunding platforms therefore provide mechanisms that enable a campaign contributor to conceal his or her identity or contribution amount from peers. We study the impact of these information (privacy) control mechanisms on crowdfunder behavior. Employing a randomized experiment at one of the world's largest online crowdfunding platforms, we find evidence of both positive (e.g., comfort) and negative (e.g., privacy priming) causal effects. We find that reducing access to information controls induces a net increase in fundraising, yet this outcome results from two competing influences -treatment increases willingness to engage with the platform (a 4.9% increase in the probability of contribution) and simultaneously decreases the average contribution (a $5.81 decline). This decline derives from a publicity effect, wherein contributors respond to a lack of privacy by tempering extreme contributions. We unravel the causal mechanisms that drive the results and discuss the implications of our findings for the design of online platforms.

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Section: Managerial Implicationsmentioning

confidence: 99%

The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

2015

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“…If there are match-specific unobservables, the likelihood function involves a numerical integral of 10,000 dimensions and an integrand that involves computing whether 1 out of 10 158 assignments occur. Of course, simulation estimators (sometimes based on moment conditions chosen for tractability) can be used for matching when required at least when markets are small and computational resources are large, as in Boyd, Lankford, Loeb and Wyckoff (2013), Sørensen (2007), Agarwal and Diamond (2013) and Fox, Hsu and Yang (2015). The computational advantages of matching maximum score are also present in single agent, multinomial choice maximum score (Manski, 1975;Matzkin, 1993;Briesch, Chintagunta and Matzkin, 2002;Fox, 2007).…”

Section: Introductionmentioning

confidence: 99%

Estimating Matching Games with Transfers

Fox¹

2008

109

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I explore the estimation of transferable utility matching games, encompassing many-to-many matching, marriage and matching with trading networks (trades). I introduce a matching maximum score estimator that does not suffer from a computational curse of dimensionality in the number of agents in a matching market. I apply the estimator to data on the car parts supplied by automotive suppliers to estimate the returns from different portfolios of parts to suppliers and automotive assemblers.

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“…4 Our paper is closest in spirit to work in the entrepreneurial finance literature on the investment selection process and returns of venture capitalists. Sorensen (2007) assesses the returns to being funded by different tiers of investors. Our work instead focuses on the margin of obtaining initial funding or not.…”

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confidence: 99%

The Consequences of Entrepreneurial Finance: Evidence from Angel Financings

Kerr

Lerner

Schoar³

2011

Rev. Financ. Stud.

413

221

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This paper documents that ventures that are funded by two successful angel groups experience superior outcomes to those that are rejected: they have improved survival, exits, employment levels, patenting, web traffic, and financing. We use strong discontinuities in the funding behavior of angels over small changes in their collective interest levels to implement a regression discontinuity approach. We confirm the positive effect of angel financing on most operations of the venture, with qualitative support for a higher likelihood of successful exits. On the other hand, there is no difference in access to additional financing around the discontinuity. This might suggest that financing is not a central input of angel groups.

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How Smart is Smart Money? A Two-Sided Matching Model of Venture Capital

Cited by 190 publications

References 40 publications

The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

Estimating Matching Games with Transfers

The Consequences of Entrepreneurial Finance: Evidence from Angel Financings

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