Sun Cast A Long Shadow? The Long-Term Implications of Short-Term Frictions in Venture Investing.

Seed-stage funding affords capital and certification to nascent ventures. Yet, we know that the decision to invest can be infused with frictions unrelated to ventures' intrinsic quality. We ask; Do seed-stage frictions impact the long-term prospects of viable ventures while propelling those serendipitously funded? Or does the effect dissipate with time? To inform this question, we track the lifecycle of 744 entrepreneurial ventures graduating from London-based accelerators. We exploit a unique feature of the setting (i.e., pitching on a Demo Day with more sunshine than the previous day, is associated with a greater likelihood of securing Demo-Day investment) to address the methodological challenge of separating quality-driven and serendipitous investments. Our results suggest that short-term friction dissipates, leaving little discernible impact on 5-year growth trajectory -- and exit -- of the ventures. We contribute to the entrepreneurship resource-assembly literature by documenting evidence about the long-term implications of short-term frictions. [ABSTRACT FROM AUTHOR]