Mi Casa Es Tu Casa: Immigrant Entrepreneurs as Pathways to Foreign Venture Capital Investments

Research Summary Venture capital (VC) firms predominantly source investments from local networks within tight geographic bounds. Against that tendency, VCs are increasingly investing internationally—but with substantial heterogeneity across firms in extent, location, and success. We propose a mechanism that explains these patterns. The ties VCs form to immigrant entrepreneurs when investing domestically provide access to the knowledge and connections of those immigrants, which facilitates VC investments in the immigrants' homelands. Using data on U.S. VC activity in India, we find that firms invest in more Indian startups as their ties to Indian entrepreneurs in the United States increase—particularly in the Indian region where immigrants originate and when the VC faces heightened domestic competition. Such ties also enhance the odds of successful exit for the VC's Indian investments. Managerial Summary Why are venture capital (VC) firms increasingly investing in foreign startups, and why do these firms differ in the location and success of such international investments? We demonstrate that the ties to immigrant entrepreneurs VCs establish when investing domestically provide knowledge and connections that enable future VC investments in the immigrants' homelands. Using data on U.S. VC firms, we find that the more ties to Indian immigrant entrepreneurs a firm develops, the more it subsequently invests in Indian startups. This effect is stronger when the VC firm faces heightened domestic competition (a push effect) and in the specific regions of India where the immigrants originate (a pull effect). Domestic ties to Indian immigrants also help U.S. VCs make more successful investments in India.