Do venture capitalists matter?
Okay, entrepreneurs and venture capitalists, here are two words that can help your investment in a startup business succeed: direct flights. A new study co-authored by an MIT professor shows that venture capitalists do help startup firms by closely monitoring their development, and that the availability of direct airplane flights between the two parties helps improve that oversight. Indeed, the introduction of a new airline route directly connecting venture capitalists to fledgling companies in which they have already invested leads to a 3.1 percent increase in the patents those firms are granted, as well as a 5.8 percent increase in the citations those patents receive — compared to equivalent cases where similar investments are made but direct flights never become available. “The effect is that those companies become more innovative,” says Xavier Giroud, an associate professor of finance at the MIT Sloan School of Management. The research examines nearly 23,000 startups that worked...