A Harvard Business School study out today:
Found that VC firms based in San Francisco, Boston and New York generally return more money on investments outside of their local geographies than on investments close to home.
The academics offer an explanation for this:
The paper suggests that this differential could be caused by VC firms using higher hurdle rates for long-distance deals. Such portfolio companies may require a higher level of managerial/monitoring effort, so more thought is given before offering up a term sheet.
Another explanation that many entrepreneurs would give: when you are far away, it’s harder to meddle with the company, telling them to outsource to india, create a facebook app, or whatever the trend du jour is.