Place and its Role in Venture Capital Funding

By Luke Heine. Harvard College.

How are city demographics correlated with the amount of venture capital they receive? The paper uses a unique dataset of ~58,000 venture deals from 2000 – 2014 from the CrunchBase dataset and census data from the same period.
“Place and the Role of Venture Capital” asserts venture capital’s spatial dependency and uses statistical software to find a strong positive correlation between the amount of venture capital funding and foreign, international, male professionals within a city, the gendering of venture capital, and the negative correlation of unskilled, foreign labor with funding.
As venture capital travels along social ties, the paper suggests that foreign, international, and male professionals’ positive correlation may be due to these members having a wider and more diverse social network, allowing the ability to conjure funds. Moreover, the demographic may be a synonym for Sassen’s “International Class,” allowing the study to dovetail with a broader set of research. Finally, the paper also provides a mechanism to classify cities based off their venture capital activity. The implications of this study are a better understanding of the trends correlated with venture capital, a classification system for cities, and a possible caveat to ‘virtuous cycle’ theory.
A supplement to the paper and to visualize implications for cities, we also created this d3 visualization visualizing the geographic positioning and relationships of those 58,000 deals, providing communicable and interactive research.

Read the full paper here.

 

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