Assessment of Founders in Venture Capital Investment Decisions
type: CreativeWork
description: This manuscript documents a research project that employs grounded theory to determine what criteria contemporary investors in early-stage startups use to assess founders. One of the first questions posed by entrepreneurship researchers - even before entrepreneurship had formalized as a field - was, what criteria do investors consider when making investments in startups? Initially, the central concern was whether it was the founder(s) or the business model, often characterized as the “jockey” or the “horse.” From the start, it was generally accepted that the founder was the primary consideration, especially in early-stage ventures. Nonetheless, while business model considerations were parsed into separate factors (e.g., market, financial, product), understanding of founder characteristics evolved rather slowly and centered on the macroeconomic construct of human capital - an aggregate measure of investment in human factors that is ill-suited to measuring micro-level characteristics of individuals. Of course, years of education and experience are reasonable criteria and in many cases are a sound foundation for assessing entrepreneurs. Recently, researchers have been increasingly examining the role of individual-level traits and behaviors across a range of entrepreneurship questions. For example, characteristics such as passion and persistence have been examined for their roles in issues like entrepreneurial intention, performance, and decision-making. Some researchers have examined how such characteristics affect investment decisions, especially among angel investors who essentially have no reliable business model information to include in their decision-making process. Also relatively recently, other organizational researchers, especially those outside of entrepreneurship, have begun serious inquiries into the constituent elements of leadership and the role of purpose, character and emotion in organizations. To assess whether these factors have infiltrated the inves…
abstract: This manuscript documents a research project that employs grounded theory to determine what criteria contemporary investors in early-stage startups use to assess founders. One of the first questions posed by entrepreneurship researchers - even before entrepreneurship had formalized as a field - was, what criteria do investors consider when making investments in startups? Initially, the central concern was whether it was the founder(s) or the business model, often characterized as the “jockey” or the “horse.” From the start, it was generally accepted that the founder was the primary consideration, especially in early-stage ventures. Nonetheless, while business model considerations were parsed into separate factors (e.g., market, financial, product), understanding of founder characteristics evolved rather slowly and centered on the macroeconomic construct of human capital - an aggregate measure of investment in human factors that is ill-suited to measuring micro-level characteristics of individuals. Of course, years of education and experience are reasonable criteria and in many cases are a sound foundation for assessing entrepreneurs. Recently, researchers have been increasingly examining the role of individual-level traits and behaviors across a range of entrepreneurship questions. For example, characteristics such as passion and persistence have been examined for their roles in issues like entrepreneurial intention, performance, and decision-making. Some researchers have examined how such characteristics affect investment decisions, especially among angel investors who essentially have no reliable business model information to include in their decision-making process. Also relatively recently, other organizational researchers, especially those outside of entrepreneurship, have begun serious inquiries into the constituent elements of leadership and the role of purpose, character and emotion in organizations. To assess whether these factors have infiltrated the inves…
author: Hennessy, Gregory Gerald
keywords: assessment, character, founders, passion, purpose, selection, Business Administration, Management, and Operations, Entrepreneurial and Small Business Operations, Psychology
date published: 2023-01-01T08:00:00Z
date modified: 2026-07-24T01:40:22Z
provider: Claremont Graduate University
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Claremont Graduate University