Face distance : unpacking the role of ethnic ties in venture capital investment

Venture capitalists have been shown to be more likely to invest in entrepreneurs of the same ethnicity. At the same time, this result rests on assumptions about how shared ethnicity is defined both theoretically and empirically. Current measurement of ethnic ties is problematic due to mis-classifications, mixed heritage individuals, and variation in accuracy by ethnicity. This paper overcomes these limitations by taking advantage of a novel source of data -- face photographs -- and by applying advanced machine learning techniques to compute the facial similarity between investors and entrepreneurs in a large scale dataset of realized and potential investments. Results suggest that previous work has vastly underestimated the relationship between ethnic ties and investment. Moreover, this relationship is more nuanced than previously documented, varies with the stage of investment and the type of investors involved, and is associated with a lower likelihood of securing follow-on funding or achieving an exit.

Department dc:contributor.department

Sloan School of Management

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2018

Author dc:creator

• Wu, Jane Yajie Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Scott Stern.

• Sloan School of Management.

Statement dc:rights

• MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/117998

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/117998