Does Social Capital Mitigate Network Access Risk in Private Markets?

Private markets investors face a largely unrecognized risk: Access to financing during periods of market stress may depend not only on fundamentals but on the strength of informal investor networks. This article introduces network access risk as a novel category of private market investment risk. We show that firms located in regions with stronger social capital rooted in tight community networks and civic engagement are more likely to obtain financing during periods of financial market stress, while firms in counties connected through wealthy friend networks do not. This suggests that investor networks built through trust and reciprocity, not wealth, function as a resilience mechanism to sustain private financing when formal capital markets contract. For institutional investors, this implies that geographic and network characteristics represent an underappreciated, measurable, and actionable dimension of private market risk assessment.