Tehran Institute for Advanced Studies (TeIAS)

/ How Venture Capitalists and Startups Bet on Each Other: Evidence From an Experimental System __ Mehran Ebrahimian

Talk

How Venture Capitalists and Startups Bet on Each Other: Evidence From an Experimental System

January 4th, 2023
(14 Dey, 1401)

14:00

Venue

Khatam University

Registration Deadline

January 2th, 2023

You may need a VPN to start the talk.

+982189174654

Mehran Ebrahimian

Stockholm School of Economics

Overview

The entrepreneurial financing process is essentially a two-sided matching process between investors and startups. This paper implements two symmetric incentivized resume rating (IRR) experiments with real US venture capitalists and US startup founders to elicit their preferences for potential collaborators. Experimental subjects evaluate randomized profiles of potential collaborators and these evaluation results are incentivized by real opportunities of being matched with their dream cooperation partners. On the investor side, we find both startups’ human assets (i.e., educational background, entrepreneurial experiences) and non-human assets (i.e., traction, business model, location, comparative advantages) affect investors’ contact interest and investment interest through influencing their evaluations of startups’ potential financial returns, risk, and availability. On the startup side, we find both investors’ human capital (i.e., entrepreneurial experiences, years of investment experiences) and funds’ organizational capital (i.e., previous financial performance, fund size) affect startups’ collaboration interest and fundraising plans through influencing startups’ judgements on the investor’s quality, potential investment interest, and the investor profiles’ informativeness. To assess the equilibrium payoffs of VCs and startups, we estimate a search-and-matching model with bargaining between VCs and startups using the experimental results. We find that an average VC gets 80% more value than an average startup because of better outside options. A substantial heterogeneity in equilibrium payoffs, explained by both human and organizational characteristics, exists across both startups and VCs.

 

Biography

Ebrahimian

He is an assistant professor in the Finance Department at Stockholm School of Economics and Eva and Mats Qviberg Research Fellow at the Swedish House of Finance. In his research he use empirical and theoretical approaches to analyze the impact of financing frictions on the real economy, especially as it relates to inequality. His Ph.D. studies is in finance at the Wharton School, University of Pennsylvania. Before Wharton, he received a M.Sc. in Economics from Sharif University of Technology and a B.Sc. in Physics from Sharif University of Technology.

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