Download This PaperData-driven Investors
202 Pages Posted: 22 Feb 2023 Last revised: 17 Feb 2025
Date Written: November 13, 2022
Abstract
How does the increased use of data technologies, like machine learning, by financial intermediaries affect the allocation of capital towards innovation? I study this question in the context of startup financing by venture capitalists (VCs). While VCs adopting data technologies become better at screening startups similar to those in historical data, they tilt their investments towards this pool and become concurrently less likely to finance innovative startups that achieve rare major success. Plausibly exogenous variations in VCs’ screening automation suggest these effects are causal. These findings highlight how investors' adoption of data technologies can have real effects through innovation financing.
Keywords: big data, machine learning, artificial intelligence, venture capital, entrepreneurship, innovation, capital allocation
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JEL Classification: G24, L26, O30
Suggested Citation: Suggested Citation
Bonelli, Maxime, Data-driven Investors (November 13, 2022). Available at SSRN: https://ssrn.com/abstract=4362173 or http://dx.doi.org/10.2139/ssrn.4362173
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- Abstract Views: 4751
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