A Lack of Insight: Do Venture Capitalists Really Understand Their Own Decision Process?

Posted: 17 Nov 2009

See all articles by Andrew Zacharakis

Andrew Zacharakis

Babson College - Arthur M. Blank Center for Entrepreneurship

G. Dale Meyer

The Meyer Group, Inc.; University of Colorado at Boulder; Western Partners Worldwide Foundation

Date Written: 1998

Abstract

Analyzes how well venture capitalists (VCs) examine their own decision making processes. Four hypotheses are presented which suggest that VCs do not perform accurate self-examinations regarding their decision criteria, more information decreases their introspection accuracy, using optimal information factors increases the VC's introspection accuracy about decision processes, and VCs are consistent in applying their decision policies. Data were gathered using an experiment which captures the real-time decision making processes of fifty-one practicing VCs from the Colorado Front Range and the Silicon Valley in California. Findings indicate that VC understanding of their decision policies is not perfect, but the strong rank order correlation between the actual and stated decision policies suggests relatively good insight. Also supported are the hypotheses that more information greatly diminishes VC understanding of decision policies, VCs using optimal cues have better understanding of their decision policies, and that VCs are consistent in applying their decision policies even if they do not consciously understand the policy. (SFL)

Keywords: Investment decisions, Decision making, Venture capitalists, Firm survival, Investment criteria, Information utilization, Decision models, Information assessment, Venture capital firms, Investment policies

Suggested Citation

Zacharakis, Andrew and Meyer, G. Dale, A Lack of Insight: Do Venture Capitalists Really Understand Their Own Decision Process? (1998). Journal of Business Venturing, Vol. 13, Issue 1, p. 57-76 1998. Available at SSRN: https://ssrn.com/abstract=1504503

Andrew Zacharakis (Contact Author)

Babson College - Arthur M. Blank Center for Entrepreneurship ( email )

Babson Park, MA 02457-0310
United States

G. Dale Meyer

The Meyer Group, Inc. ( email )

Interurban Park
1800 Bluebell Avenue
Boulder, CO 80302-8022
United States
303-442-4319 (Phone)

University of Colorado at Boulder ( email )

1070 Edinboro Drive
Boulder, CO 80309
United States

Western Partners Worldwide Foundation ( email )

Interurban Park
1800 Bluebell Avenue
Boulder, CO 80302-8022
United States

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