In search of unicorns: Overconfidence and missed opportunities due to stereotypical founder bias in televised startup pitch competitions

Livia Boerner (), Bernd Frick Author-2-Name-First: Bernd Author-2-Name-Last: Frick () and Thomas Fritz Author-3-Name-First: Thomas Author-3-Name-Last: Fritz ()
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Livia Boerner: Paderborn University
Bernd Frick Author-2-Name-First: Bernd Author-2-Name-Last: Frick: Paderborn University
Thomas Fritz Author-3-Name-First: Thomas Author-3-Name-Last: Fritz: FH Aachen

No 122, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

Abstract: This study examines investment decision accuracy and founder-related bias of angel investors in startup pitch competitions. We use a unique dataset of N = 638 pitches and investment decisions from televised German format Die Höhle der Löwen and evaluate subsequent venture performance based on survival and product-market fit. Building upon signal detection theory, two types of decision error are distinguished to explore investor bias. Our results suggest that angel investors are more likely to make overconfident (false positive) investments when ventures are pitched by more attractive entrepreneurs or family-based teams. Additionally, ventures pitched by younger, female, or less attractive teams are systematically underestimated, resulting in missed opportunities (false negative). Our study contributes to the literature by highlighting the impact of founder-related investor bias on the quality of their investment decisions.

Keywords: Entrepreneurial finance; Investor bias; Overconfidence; Missed opportunities; Shark tank (search for similar items in EconPapers)
JEL-codes: D81 D91 G24 G41 L26 (search for similar items in EconPapers)
Pages: 36
Date: 2024-09
New Economics Papers: this item is included in nep-cfn, nep-mac and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:pdn:dispap:122

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