Who Finances Startups in the USA? A Comprehensive Study of Informal Investors, 1999-2003

Abstract

We examine the informal investment1 in the U.S.A. during the period 1999-2003. We develop models that correlate informal investment with income, net worth, age, education level, gender, whether or not an investor is also an entrepreneur, and residency of the investor (e.g., rural versus urban). The dependent variables are (1) Whether or not a person is an informal investor, and (2) Amount of informal capital an individual invests per year. The data set comprises 22,292 household interviews from the annual Global Entrepreneurship Monitor (GEM) study in the U.S.A. over the period 1999 and 2003. We believe our findings are useful for entrepreneurs looking for informal investment; policy makers seeking to stimulate informal investment; and professionals such as accountants, lawyers, financial advisors, and educators dealing with entrepreneurs and informal investors.

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