Close-ups from afar: the nature of the informal venture capital market in a spatial context
Abstract: The availability of external equity finance is one of the vital conditions for emergence and growth of young entrepreneurial firms. Yet, the access to finance is both limited and unevenly distributed in geographical space. At the same time, there is anecdotal evidence that the informal venture capital market plays a significant role in providing small-scale geographically dispersed finance to entrepreneurial ventures in early development stages. However, our knowledge about the nature and geographical characteristics of informal venture capital market is very limited. The overall purpose of this dissertation is to develop knowledge of the nature of the informal venture capital market in a spatial context. First, the dissertation aims to contribute to our knowledge of the informal venture capital phenomenon, by developing the understanding of different cohorts of informal venture capital investors. Second, it aims to explore the characteristics and the scope of the informal venture capital market in relation to its potential to bridge the financing gap, and particularly the regional equity gap, for young entrepreneurial firms. Third, it seeks to provide theoretical explanations for why informal venture capital exhibits certain locational patterns, and the role geography plays in informal venture capital investing. The analysis presented is based on a large quantitative material of 278 informal venture capital investors in Sweden, complemented by four case studies. This dissertation presents an inquiry into the field of informal venture capital and develops the literature by: (i) broadening the scope of the informal venture capital concept and contributing to definitional clarity, (ii) exploring the magnitude and the geographical characteristics of the informal venture capital market in Sweden, and (iii) developing our understanding of the role of proximity in informal venture capital investing.
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