3 things today: investors (like other human beings) use mental shortcuts (called cognitive biases) in their decision-making process.
Top three shortcuts used include:
- confirmation bias (investors look for confirmation of their beliefs/values when evaluating startups and favour those with most “confirmations”)
- hindsight bias (investors think past successes of founders give them a good chance for a repeat success in future)
- bandwagon effect (investors jump on an investment opportunity that has other influential investors, advisors or founders with good track record).