Patterns in Spatial Proximity between Venture Capital Investors and Investees in Germany

The paper analyzes patterns in spatial proximity between venture capital investors and investees. We use a dataset of 1256 dyads of venture capitalists and German new ventures which have closed a financing round between January 2002 and March 2007. Our results indicate that different factors relating to characteristics of the new venture, the venture capitalist and the financing round help explain variations in spatial proximity. We find that spatial proximity is more likely for younger ventures and for smaller, (quasi)-public and less specialized venture capitalists. Our evidence indicates that syndication is associated with a wider geographic spread of investments and that consecutive financing rounds are more likely with close distances. Furthermore, we find different effects for lead- and co-investors. Finally, we discuss implications for entrepreneurs, venture capitalists as well as policy makers and outline areas for future research