PhD candidate Anna Souakri and her supervisor, Professor Régis Coeurderoy, were granted a best paper award for their research work, which provides a more accurate understanding of which specific entrepreneur characteristics really matter in the screening decisions made by Venture Capitalists (VCs).

“When I check a pitch deck, I don’t care about future projections. It’s hazardous, so I directly look at the information about the CEO and when he reminds me of myself, I’m curious. I want to see this guy, it’s a green light,” PhD candidate Anna Souakri*, Professor Régis Coeurderoy as well as Babson College Professor of Entrepreneurship Andrew Zacharakis quote an early-stage venture capitalist with entrepreneurial experience in startup creation as saying. “To be honest I don’t look at the financial data and the likes,” adds a serial entrepreneur, business angel and founder of a venture capitalist firm. “At this [screening] stage, you can’t predict anything so I just look at the founders and my gut feel tells me if I want to know more.” As these examples show, investors try to reduce uncertainty on a startup’s potential by looking at the characteristics of the lead entrepreneur, defined as the entrepreneur who has founded and leads a new venture. “Previous research has supported the idea that the lead entrepreneur’s human capital - measured as the stock of personal knowledge, skills and abilities that are accumulated by entrepreneurs through education, training and other types of experience - plays a determining role in VCs’ assessment, far ahead of other venture characteristics”, they explain. “Knowledge of the specific preferences of VCs when screening proposals, however, is still limited to general demographic characteristics and mostly studied at the team level. The previous empirical studies do not distinguish specific entrepreneurial experience in terms of startup creation among other types of experience and characteristics of the entrepreneurs.”
This I why they chose to work on this topic, eventually presenting their paper entitled “Does Entrepreneurial Experience Really Matter in Venture Capitalists' Screening Decisions? Preferences and Similarity-attraction in the VC-lead Entrepreneur Dyad” in June at the BCERC (Babson College Entrepreneurship Research Conference), which is considered as one of the most prestigious research conferences in entrepreneurship. They were rewarded with the National Federation for Independent Business (NFIB) Award for Excellence in Research on a General Topic in Entrepreneurship.

Extending existing research studying the role of entrepreneurial experience in VCs’ decision-making

The findings of their research, which is based on a conjoint experiment on 1,768 screening decisions, reveal that independently from the outcome of the venture, entrepreneurs’ experience in serial startup creation is influential on VCs’ evaluations and on their judgment of generic human capital (level of education), and conveys information about the quality of the venture and its potential for success. Furthermore, their results indicate that VCs favour lead entrepreneurs who share the same experience in raising seed-money as they did. “Together, these results deepen our understanding by exploring how unique entrepreneurial experience characteristics across lead entrepreneurs and VCs shape early-stage investment decisions,” they believe. Their results seem to have implications for research on VCs’ decision-making and, more generally, biases in decision-making.
Their core contribution is actually a step towards a line of research further exploring entrepreneurs’ characteristics that may change the outcomes of VCs’ screening decisions: “We provide a way forward to theoretically and systematically think about how certain entrepreneurs may be better positioned to get funds from certain types of investors,” they add. “In addition, we are among the first to empirically study similarity biases between the VCs and the lead entrepreneur. This allows us to disentangle the effect of the mixture of several characteristics attached to several team members from the impact of the unique characteristics of the lead entrepreneur.”

* Anna Souakri has benefited from an ESCP Foundation scholarship during her doctoral path.

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