ENTREPRENEURS’ CHARACTER AND COMPETENCE: HOW ANGEL INVESTORS FORM INITIAL IMPRESSIONS OF TRUSTWORTHINESS

In coming to a rapid decision of whether or not to invest, early stage investors have been purported to rely on judgments of the attractiveness of industry settings, the breakthrough potential of new innovations, and the quality of the entrepreneur and entrepreneurial teams. Yet research has shown their choices to be internally inconsistent with even their own decision rules. How is it, then, that these investors come to form a sufficiently stable impression to take action? We focus on how the assessment of the lead entrepreneur begins to materialize from initial information and signals about the entrepreneur’s character and competence. Investing in early stage companies is a risky proposition that requires confidence and trust in the entrepreneur. The perceived trustworthiness of the entrepreneur is therefore a critically important determinant of the ultimate investment decision. Our premise is that this process begins with scant and often contradictory signals about character and competence. We investigate how early signals influence the decision to trust and to invest.