Attracting Early Stage Investors: Evidence from a Randomized Field Experiment

This paper uses a randomized field experiment to identify which start-up characteristics are most important to investors in early stage firms. The experiment randomizes investors’ information sets of fund-raising start-ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. In contrast, inexperienced investors respond to all information categories. Our results suggest that information about human assets is causally important for the funding of early stage firms, and hence, for entrepreneurial success.

Hypotheses/research question 
Which elements are most important in the investment decision process of early stage investors?
Study design 
Bernstein, S., Korteweg, A., & Laws, K., 2015. 'Attracting Early Stage Investors: Evidence from a Randomized Field Experiment'. Rock Center for Corporate Governance at Stanford University Working Paper No. 185. May. Stanford University Graduate School of Business Research Paper No. 14-17.