Importance of spatial proximity between venture capital investors and investees in Germany
Based on 1182 dyads of venture capitalists and German portfolio companies involved in a financing round between 2002 and 2007, the study here examines the importance of spatial proximity between investors and investees in a dense economy. Analysis of this data shows that the probability of a financing relationship decreases by 8% if the journey time increases by one standard deviation. For deals involving very small or very large investment sums, and for less experienced venture capitalists and lead investors, spatial proximity is particularly important. The results suggest that even in economies with a dense infrastructure such as Germany spatial proximity between investor and investee impacts the likelihood of an investment.
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