At the Individual Level. National Survey of Angel Investing Rob Wiltbank Asst Professor of Strategic & Entrepreneurship International study of decision making under uncertainty Angels, VC’s, entrepreneurs and managers 1,038 Angel Investments, 414 exit events.
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Years, number of investments, and number of startups
Stage & Industry focus, Due Diligence, Deal Sources, Participation post investment
Entrepreneurial scenario responses
Prediction:To the extent that I can predict the future, I can control my outcomes.
efforts to insightfully position for success based on expectations/forecasts for the development of important market elements. This often includes modeling event spaces, estimating probabilities and consequences, and forming sophisticated portfolio strategies with multiple options. Assumes that market elements are predominantly independent of the organization.
Control:To the extent that I can control the future, I do not need to predict it.
efforts to deliberately construct/create market elements, such as defined products, articulated demand preferences, and market structures (i.e. channels, technical standards, common practices). Assumes either the non-existence of some key elements, or the organization’s ability to significantly affect the evolution of those elements.
Prediction is uniquely difficult with new ventures,
while efforts to directly construct markets may be particularly effective.
Affordable Loss, Pre-Commitments, and Leveraging Uncertainty
of a valuable future
Try harder to predict and
position more accurately
Emphasis On Prediction
Transform current means
into goals created
with others that commit
to build a possible future
Move faster to adapt to a
rapidly changing environment
Emphasis on Control
Create and Influence local or smaller markets, rather than compete in large “ideal” ones.
Adjusting goals is less expensive than acquiring different means.
Commitment is more important than Best.
Overhead trails growth
Emphasize affordable loss rather than maximizing expected values.
Control is likely to reduce failures, but possibly at the expense of homeruns.
Prediction may increase failures, but when predictions are on target…..
Perception of success by the investor
# of exits across IRR categories
assumes consistent investment size across deals.
keep in mind possible self selection bias.
the majority of deals remain open.
Investing and Entrepreneurial Experience
and improved success/fail ratios
Development Strategy: Prediction vs. Control
decreases negative exits without reducing homeruns.
Shaded areas are key regression factors.
2/3 computer related, 15% nontech, 15% healthcare related.
To the extent that I can control the future, I do not need to predict it.