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Prediction and Control Under Uncertainty: Outcomes in Angel Investing

2009

Saras Sarasvathy Stuart Read Nick Dew Rob Wiltbank

Venture investing plays an important role in entrepreneurship not only because financial resources are important to new ventures, but also because early investors help shape the venturesโ€™ managerial and strategic destiny. In this study of 121 angel investors who had made 1038 new venture investments, we empirically investigate angel investorsโ€™ differential use of predictive versus non-predictive control strategies. We show how the use of these strategies affects the outcomes of angel investors. Results show that angels who emphasize prediction make significantly larger venture investments, while those who emphasize non- predictive control experience a reduction in investment failures without a reduction in their number of successes.

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