About This Project

Entrepreneurship research says that investors such as VCs/angels are sensitive to the nature of information presented to in investor pitches - the more information, the higher is the chance of raising funds. Literature is relatively silent as regards if investors are sensitive to the "structure" of information i.e. ways in which data and arguments connect in investor pitches. Knowing this will add to our understanding of investor decision-making, venture finance & psychological biases.

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What is the context of this research?

Entrepreneurship & management research state that VCs/angel investors are sensitive to the nature of information presented in pitches - the more information, the higher is fundraising likelihood (Huang & Pearce, 2015). We need to know if investors exhibit sensitivity to ways in which arguments and data are connected in investor pitches. I look to understand if and why i) simple arguments are preferred to complexity, ii) decision-making is sensitive to the time available to make decisions, iii) experienced investors (VCs, angels) behave differently from lay investors. Knowing these could be a large addition to fundamental questions in entrepreneurship and decision-making theories and practice.

What is the significance of this project?

The proposed research project is poised to make several contributions to theory and practice in entrepreneurship and management. First, to the entrepreneurial finance literature, it stands to add that not only information, but also the structure of information of business plans matter. Second, to the heuristics & biases literature, it stands to add how investor biases change with time pressure and prior experience. Finally, to entrepreneurs and investors, we stand to inform what biases they can be prone to committing, and how to be aware of them so that when entrepreneurs seek funding, the true economic potential of business are not crowded out by biases. These areas of inquiry have far-reaching implications, but have remained black boxes in extant research.

What are the goals of the project?

The first goal is to test the following hypothesis: There is a causal linkage between variation in structure of business pitches to investor reaction to them. This involves performing field or online experiments where investors/ finance professional subjects are asked to indicate their willingness to fund projects that vary in terms of their structure.

The second goal is to find if the decision-making biases in the experiments have external validity, and the extent to which the biases influence actual investor behaviour. his involves quantitative study whose steps are: i) coding actual business pitches from pitching events, ii) regressing funding outcomes on pitch structure, iii) which will be coded using text-analysis tools such as LIWC, or Topic Modeling technique.