E739: “Gut Feel” in angel investing: Wharton Prof of Entrepreneurship Laura Huang on how early investors make decisions, quantifying the unquantifiable, questioning meritocracy, the role of gender & other biases (& how to hack them)

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about this episode

Laura Huang is a Professor of Management and Entrepreneurship at the Wharton School, University of Pennsylvania. Laura’s research examines how an investor’s gut feel plays a role in innovation and entrepreneurial decision making. She explores how perceptions and cues influence an individual’s ability to make important, high-stakes decisions, how attractiveness and gender affect pitch success, and if investors are behaving differently in those circumstances because of the valid pressure on the investment community to see more diversity. Join us in this thought-provoking discussion about the known unknowns in the angel investing space, Jason’s theory of investment, and what meritocracy really means in Silicon Valley.

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Timestamps:

01:40: Jason introduces today’s guest, Laura Huang, Professor of Entrepreneurship at Wharton

2:25: Studying how angel investors make decisions is very experiential

5:50: Laura explains her multimethod system that includes variables such as interviews, content analysis, and videos

8:42: How to pick investors

9:15: Partnership with Angel Capital Association

10:00: Results of the study

11:00: In her interviews, Laura found that a lot of investors would go back and say “I just had this gut feeling”

12:20: Laura wanted to quantify the unquantifiable, taking something like gut feeling and seeing what’s actually embedded in that

14:30: One of Jason’s organizing principles of angel investing is that if everybody understands the idea and believes in it, then it will not have an outsized outcome, because it’s too obvious of an idea and should have been done already

19:19: Attractiveness in relation to getting investment: females are not as funded as men, but attractive men get an extra premium and are funded the most

20:57: How to determine attractiveness

24:30: Hacking biases

27:00: How answering investor questions can differ by gender and how questions are being asked could impact how an entrepreneur responds

33:00: Laura explains what it’s like as a woman doing research on male bias

35:10: Which is the main issue: women and how they present, or investors and their biases?

37:15: Advice on hacking biases

38:00: Effect of American accents on getting funding

42:00: Jason’s approach to female entrepreneurs

46:00: Role of aggression

47:00: Jason and Laura debate about investing in entrepreneurs that are uncoachable

51:00: What gets entrepreneurs like Steve Jobs, Travis, Elon Musk into the industry

53:00: Chart of “Exchange-Based Model of the Entrepreneur-Investor Relationship”

57:00: Jason’s theory of investment

59:37: Chart of “Effect of Perceptions of the Entrepreneur on Propensity to Invest”

01:00:00: Investors would rather invest in a strong person with a bad idea than a weak person with a great idea

01:03:20: How often is the “gut call” more just an angel betting on a jockey vs. the business opportunity or projections?

01:05:20: Obesity/smoking and how that affects the perception of being fundable

01:08:14: Do you believe Silicon Valley is a meritocracy?

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