Determinants of the spatial reach of venture capital firms in the United States

ABSTRACT Building on elements of human capital, agency and social network theories, this paper analyzes the determinants of spatial reach of the venture capital firms (VC) in the United States. Based on data obtained from Crunchbase website, I develop a sample of VC investments in the U.S. from 2003-2010. I find that VC experience, syndication and VC size expand the spatial reach. I also observe differences in how experience affects geographic scope at the state level. The results show that U.S. VC industry is not homogeneous, exhibits different regional characteristics regarding investment patterns and is concentrated in few areas such as Silicon Valley, California and Route 128, Massachusetts. I find that for VCs located in those regions, experience does not affect geographic preferences regarding in-state investments while a positive effect on the geographic scope of their activities can be observed for the out-of-state investments. For the VCs based anywhere else in the U.S., the results show that accumulation of experience leads to making more investments locally. Keywords: venture