The Digital Initiative Presents

Judging foreign startups: evidence from virtual global venture competitions

11:00 am October 19, 2020

Online

Accelerators and investors evaluate entrepreneurial ideas in an increasingly global context. Do they pick the most promising startup ideas? On one hand, international variation in evaluations may not matter as startup practices become more standardized and technology-driven. If international context matters, then evaluators’ local expertise may help them assess the quality of startups, but it may bring home biases that prevent them from choosing the best ideas. We unpack the extent to which home bias exists in the entrepreneurial selection process using unique data from the virtual global round of a large accelerator in which multiple judges from different regions are randomly assigned to evaluate startups from different regions. Our analysis of this natural experiment shows that judges are 4 percentage points less likely to recommend startups headquartered outside their home region than those from other regions. The effect size is meaningful: nearly half the size of the effect of the startup already having traction and over 10 percent the size of it having raised seed or other venture capital funding, and it may result in judges missing out on promising foreign startup ideas. Judges’ discounting of foreign startups does not appear to be driven by informational channels, but rather is a consistent “bias” against foreign startup ideas, though judge experience appears to alleviate the effect.

This event is open to faculty, doctoral students, academic researchers, and graduate students.

Judging foreign startups: evidence from virtual global venture competitions
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