Audience Expertise and Category Distances: A study in the Venture Capital Industry (2000-2017)

In research on social evaluations and market categories, the extent to which audience members’ expertise dimensions – breadth and depth – influence firm valuation has been largely ignored. Furthermore, category research has overlooked the consequences of the nested disposition of categories. Using a dataset of around 29,000 venture capital deals worldwide between 2000 and 2017, we address these gaps by examining the effect of investees’ intra-category distance, beyond inter-category distance, as well as investors’ expertise breadth and depth. Our findings provide evidence that both inter- and intra-category distances positively impact valuation as that those effects are contingent on investors’ expertise breadth and depth. Our findings contribute to research on social evaluations and market categories.