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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Livia Boerner & Bernd Frick Author-2-Name-First: Bernd Author-2-Name-Last: Frick & Thomas Fritz Author-3-Name-First: Thomas Author-3-Name-Last: Fritz, 2024. "In search of unicorns: Overconfidence and missed opportunities due to stereotypical founder bias in televised startup pitch competitions," Working Papers Dissertations 122, Paderborn University, Faculty of Business Administration and Economics.
    • Handle: RePEc:pdn:dispap:122
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    File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/dispap/DP122.pdf
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    More about this item

    Keywords

    Entrepreneurial finance; Investor bias; Overconfidence; Missed opportunities; Shark tank;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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