DUE TO THE COVID-19 EMERGENCY, THE SEMINAR HAS BEEN CANCELLED.

Laura Huang
Harvard Business School

Abstract:

A central question for entrepreneurs seeking growth capital—financial capital from external financiers such as angel investors and venture capitalists that will enable them to grow and scale their startups—is how investors make their investment decisions and what specific criteria they employ. Prior research has attempted to understand investment criteria that range from “hard” data that reflect business viability to more subjective, “soft” data that reflect tacit, non-codified information. Drawing on theories of behavioral finance and entrepreneurial uncertainty, we examine how the lines between investors—whether acting as an individual or institutional investors—have begun to blur, and who investors are impacts how they employ these criteria. We study the phenomenon of private angel investments by individual venture capital partners, outside of their employer and with their personal funds. Specifically, we find that institutional investors who are governed by a collective, “justification-based” decision frame are more likely to require “hard” data and signals of strong business viability data in making their funding decisions, whereas those who are guided by a more individualistic, “discretion-based” decision frame are more likely to invest in deals that are worse on observable business viability characteristics.  Furthermore, our findings suggest that under certain conditions, institutional investors who adopt the latter type of decision framing may be more likely to realize positive investment outcomes in early-stage investment decisions.

Laura Huang is an associate professor of business administration in the Organizational Behavior Unit of the Harvard Business School.  Prior to joining HBS, she was an assistant professor of management at the Wharton School, University of Pennsylvania.  

Venue
Department of Management, Economics and Industrial Engineering
Building B26/B – Room 0.2 – ground floor
Via Lambruschini 4/B, Milano