A study on the art and science of pitching new businesses

Abstract

This study focuses on how entrepreneurs can optimize the venture capital procurement process by understanding the venture investment decision-making process. For new ventures, procuring capital is a notoriously difficult process. To succeed, an entrepreneurial team must overcome investor uncertainty about the quality of their product/service/idea and market, as well as their own capability to execute. This thesis puts forward the hypothesis that there are multiple venture investor "types," or "personalities," defined by the way in which they weight the importance of product/idea/service/market (horse) vs. entrepreneurial team (jockey) during the decision-making process. Therefore, an entrepreneurial team should match the strengths of their business with the right investor type to maximize chances for funding. To test this hypothesis, we ran an empirical study which mimicked the first two stages of the venture investment process - executive summary review and entrepreneurial pitch assessment. The experimental results suggest that investors do seem to report varied preferences on the importance of "horse" vs. "jockey." In addition, investor personality may dictate decision-making at the executive summary stage. However, the overall quality of a business' pitch can have significant influence on investor opinion and "willingness to invest" regardless of investor personality.