Cognitive Bias

back Contents COGNITIVE BIAS How the Zeigarnik Effect drives investment decisions Published date:  14 October 2024   |  5-Min Read Have you ever found yourself preoccupied with an unfinished task, lingering in your mind long after you’ve moved on? Whether it’s a deal stuck in due diligence or a project awaiting closure, incomplete tasks tend to occupy more mental space than those we’ve successfully wrapped up. This psychological phenomenon, known as the Zeigarnik Effect, explains why unfinished business dominates our thoughts and compels us to seek resolution. Named after psychologist Bluma [...]

Back Contents COGNITIVE BIAS How did a stranger’s house spark a fear of regret? Published date:  8 October 2024   |  5-Min Read Why do incomplete tasks linger on your mind? One of the most powerful motivators of human behavior is the desire to avoid regret. Venture capitalists know this feeling all too well, as the choices we make (or don’t make) can have lasting consequences—both financial and emotional. The fear of regret can drive investors toward safer bets or paralyze them from acting at all. This concept, studied deeply [...]

Back Contents COGNITIVE BIAS Have you ever called your portfolio company ‘ambitious’? Published date:  30 September 2024   |  5-Min Read Companies are not people Personification bias is deeply embedded in human cognition. It can be traced back to ancient times when myths and stories were used to explain natural phenomena by attributing human qualities to gods or forces of nature. For example, the ancient Greeks believed that Poseidon's anger caused storms and earthquakes. This tendency to humanize inanimate and explain events through personal characteristics persists today, even in modern [...]

back Contents COGNITIVE BIAS Why only 1% of entrepreneurs succeed more than once? Published date:  23 September 2024   |  5-Min Read One of the most persistent challenges in the world of alternative asset investing is navigating cognitive biases, particularly the illusion of skill. This bias can lead an investor to overestimate their own abilities or those of "star" founders, assuming past successes will naturally repeat. While we’d like to think our judgment and experience guarantee results, the reality is far more complex—luck and timing often play much bigger roles than we [...]

Back Contents COGNITIVE BIAS Why your first impression of a startup could be losing you millions! Published date:  16 September 2024   |  5-Min Read What is the Anchor Effect? Saskia van den Ende from Antler kickstarted this conversation in her piece "The elephant in the room: The role of unconscious bias in venture capital decision-making," where she defined anchor bias as: The tendency to rely too heavily on the first piece of information encountered when making decisions. In the context of VC, this can lead investors to place too [...]

Back Contents COGNITIVE BIAS How first impressions shape investment decisions Published date:  28 August 2024   |  5-Min Read What is the halo effect in investing? Imagine a venture capital (VC) firm evaluating two startups for potential investment. Startup A is led by a charismatic, well-connected founder who previously worked at a renowned tech company. The founder’s impressive background, polished pitch, and the high-profile advisory board instantly capture the attention of the VCs. Because of these strong initial impressions, the VCs subconsciously start to overlook potential red flags, such as [...]